In our latest Insight piece, we explore the parallels between the poker table and the world of investing by studying the nuances of risk and uncertainty. Authors Scott Smith (Managing Partner) and Ben Reeves (Manager, Data Science & Engineering) demonstrate how utilizing a Risk Parity strategy can help investors embrace uncertainty and derive more stable investment outcomes.
[...]BLOG SERIES: UNDERSTANDING RISK
In the third installment of our deep dive on volatility, Amin Haji, Manager of Investment Research and Analytics, discusses how portfolio constraints can affect your ability to take risk, focusing on time horizon and liquidity constraints. Using succinct examples, Amin explores whether or not liquidity needs have an effect on how impactful volatility is to your long-term wealth, and how simply having a longer time horizon may not in fact lower your ability to take risk, as conventional investing wisdom would have you believe.
[...]BLOG SERIES: UNDERSTANDING VOLATILITY
Volatility drag – or how volatility exacerbates the divergence between arithmetic returns and geometric returns – is something that is often debated by investment managers and investors alike. A common argument is that while higher volatility increases your downside, it can also increase your potential upside and therefore it may be rational to be risk-seeking to some extent. Another argument is that with a long enough time horizon, investors don’t actually need to worry about volatility, because they can tolerate the ups and downs of the market.
[...]BLOG SERIES: UNDERSTANDING RISK
Over the past couple of months, investors of all types have likely been caught off guard by global events that caused massive swings in the market value of their portfolio holdings. Unfortunately, some have realized that their investments were far too risky and have lost more than they could tolerate. The old gambler’s adage of not risking more than you are willing to lose holds true for investors as well – but how do we know how much is really at risk?
[...]The COVID-19 global pandemic is a historic event that has galvanized intergenerational cohorts in the fight against a common enemy. I will not attempt to wax-poetic about the implications this will have on our way of life for when we inevitability get through to the other side of this epidemic, as there are much more qualified experts that can offer better educated opinions on the matter then I can. What I will attempt to do is explore a way to reframe the implications of this health crisis for investors that are dealing with both emotional and financial stress as a result of the pandemic.
[...]There has been a lot of talk over the past few years about how passive investing and the rise of exchange traded funds (ETFs) would be the next financial market bubble that would wreak havoc for investors. There hasn’t been a period of panic in financial markets similar to what occurred in 2008 to test the mettle of ETF products – that is, until the COVID-19 pandemic of 2020.
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