Someone asked me how is he going to earn money if the equity market continues to go down. Instead of using the usual replies that all financial advisers give, I suggest a more high level view of investment:

Equity market surprisingly exhibits a very nice statistical behavior. Certain returns of equity markets behave like a random process with a defined expectation and standard deviation (those who studied statistic with at least an “A” level, it is time to recall Expectation = average; Standard deviation = Square Root of Variance). The MSCI World Free index is a classic case. Using empirical data from 31 Dec 1969 to 31 Dec 2007 (which consists of 456 sample data), I calculated that the average monthly returns was 0.84% and the standard deviation was 4.07%. I then construct the histogram of these samples data and super impose with it an ideal normal distribution curve with Z = (X – 0.84%)/4.07%. This is what I got HERE