The vast majority of the time, most investors are not terribly concerned with their risk tolerance. Typically, the CBOE Volatility Index (VIX), a measure of S&P 500 volatility, sits comfortably below 20 and financial markets exhibit a consistent upward trend. However, as 2020 can attest, markets don’t always behave this way. Earlier this year the…
Tag: Risk Tolerance
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…
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…