Rising From the Ashes

The traditional 60/40 balanced portfolio is no stranger to coming under fire. Many pundits have decreed the death of the balanced portfolio, arguing that a low yield environment will prove insurmountable and bonds will no longer be able to provide necessary diversification for investor portfolios. This proclamation has yet to be proven correct, and in the investment management industry, being too early is the same thing as being wrong. That being said, is this time different?

Is the 60/40 Portfolio Dead?

Over the last decade, there have been many proclamations that the traditional 60/40 portfolio is dead, mainly due to the fact that bonds were supposedly overvalued and yields couldn’t go any lower. This article from Ben Carlson highlights that while a 60/40 portfolio has delivered outstanding returns as a result of falling real interest rates…

Order Matters

Many investors, especially those with longer time horizons, tend to overlook the impact that volatility can have on their portfolio. However, the path of returns is not a factor to be ignored and a recent piece by Amy Arnott helps illustrate this point through several examples. She highlights the impact of positive returns early in…

Not Everyone Is A Winner

While in the midst of COVID-19, historical levels of unemployment, unprecedented levels of economic stimulus, and falling corporate profits, the Standard & Poor’s 500 Index (S&P 500) is in positive territory for 2020. The economic data would indicate we are in a recession, yet U.S. equity markets are not behaving as such. A recent article by…

One Size Doesn’t Fit All: Assessing Suitability in the Context of Uncertainty

BLOG SERIES: UNDERSTANDING RISK

This installment in our volatility series will aim to provide a framework that helps to quantify an investor’s ability and willingness to take risk based on constraints and the importance of reaching wealth targets. Additionally, I will finally add varying returns into the analysis to illustrate the impact of the risk and return trade-off. Through simple examples and simulations, I will show that understanding an investor’s total financial picture and applying a probabilistic framework for risk management can help achieve desired outcomes in the face of uncertainty.

How Much Can You Bear?

In last week’s edition of Sagacious, we explored the rationale for shifting away from a traditional balanced portfolio (60 percent equities, 40 percent fixed income) based on recent comments from Dr. Jeremy Siegel, a finance professor at Wharton. However, just because a portfolio may be deemed efficient, doesn’t mean that it’s necessarily right for all…

Good Old Faithful, or Just Old?

The popular 60/40 balanced portfolio (60% equities, 40% fixed income) has been a staple for many investors through their lifetimes and deservingly so. According to a recent piece by M. Batnick, 60/40 portfolios have boasted an annualized rate of return of 7.5% and positive rolling five-year returns in 99.4% of cases over the past half…

Vitamin D: Harvesting the Diversification Premium Through Prudent Leverage

BLOG SERIES: RISK PARITY

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.

I’m Smarter Than You

Over recent weeks, the recovery of equity markets has left many scratching their heads. In particular, some distressed companies, such as Hertz (NYSE: HTZ) and Chesapeake Energy Corp. (NYSE: CHK), have experienced monumental gains after releases of negative news. A recent piece out of the Wall Street Journal explores how the overconfidence of investors contributes…

Your Guess Is as Good as Mine

From February 19th to March 23rd, the S&P 500 plummeted -34 percent. From March 23rd until time of composition, the same index climbed approximately 50 percent. Do not confuse this as a net gain. (Refer to our blog series on risk and volatility for how path dependency is important for the geometric compounding of investment…