Back in the ’70s when I learned about investing, we sophisticated folks understood that financial markets are “efficient” and the Capital Asset Pricing Model (CAPM) would guide us. You could reduce your risk somewhat by having a diversified portfolio, but to get a higher return you’d have to accept more risk of loss. Of course there was no Internet, no easy way to check this for ourselves, but I did get access for a time to a remote terminal connected to a computer which supposedly allowed me to test this theory. I did so, and the results were consistent, tho today I certainly can’t remember the details.
So when I first read Progress & Poverty in the ’80s, I was a bit troubled by this from Book III Chapter 4: Continue reading Investing risk vs. return: Henry George was right