Özgür Demirtaş warns investors

Economist Özgür Demirtaş issued a warning to investors in a post on his X account.

In his post, he included the following:

"My dear friends,

I would like to provide you with some information and a warning regarding your investments.

Each of you invests in instruments such as deposits, bonds, stocks, crypto, and derivatives, and the issue you care about most is RETURN.

I am not blaming you, of course, average return is one of the most important issues.

However, return does not mean performance. A performance measurement is achieved by evaluating return and risk simultaneously.

We know how return is measured. Selling Price minus Buying Price divided by Buying Price...

However, measuring risk is not that simple. There are hundreds of different risk measures, and scientists in the field of finance evaluate each of these measures in their academic publications.

Among the prominent risk measures, the two best known are:

1) Standard Deviation of the investment.

2) Beta of the investment.

Let's say you have an investment. You held it for 1 year and you have daily return data for 220 business days.

Standard deviation is a standard measurement you learned in statistics classes. When you sum the squares of the deviations of 220 daily returns from the average and take the average, you reach the variance. The square root of this is the standard deviation.

Beta, on the other hand, measures the relationship of your 220-day return data with the market index of the country where your investment is located. To explain it simply: Let's say you invested in 5 stocks in Turkey. You had a percentage return every day. There were 220 of these returns in a year in terms of business days... Let the market measurement in Turkey be the BIST100. In this case, your beta is: the CO-VARIANCE between your portfolio's return data and the BIST100's return data within 220 days, divided by the BIST100's standard deviation multiplied by your portfolio's standard deviation.

I have given you only 2 risk measures here, but there are much more detailed risk measures as well.

Let's come back to the subject of performance. Your investment performance is not measured only by your average RETURN. Your return-to-risk value is important.

Let's say there are two investments:

Investment A:

Average Return: 40%

Standard Deviation: 20%

Investment B:

Average Return: 30%

Standard Deviation: 10%

Look, if you only look at the return, Investment A seems better than Investment B. But according to a performance measure like return divided by standard deviation, B is a better investment.

Remember, you should not look at RETURN alone...

Those who only look at return are actually gambling,

either they don't know it yet,

or they will learn it soon when they lose.

I felt like writing this,

Best regards to everyone"

Sevgili Arkadaşlarım,

Size yatırımlarınız konusunda bir bilgi vermek ve uyarmak istiyorum.

Her biriniz Mevduat, Tahvil, Hisse Senetleri, Kripto, Türev Ürünleri gibi enstrümanlara yatırım yapıyorsunuz ve en çok önemsediğiniz konu GETİRİ.

Sizi suçlamıyorum elbette averaj Getiri…

— Özgür Demirtaş (@ProfDemirtas) January 31, 2024

News Source: 12punto