Flying Too Close to the Sun

Many have heard the ancient Greek myth of Icarus, the boy who was granted the gift of flight by his father who crafted wings out of wax and feathers in order for the duo to escape the labyrinth to which they were confined. Icarus’s father had only one warning for his son and that was…

Monte Carlo Simulations: A Journey Down Many Paths

In a previous blog post by Viewpoint Investment Partners, Volatility, A Skewed Reality, Amin Haji, Manager, Research & Analytics, explored the probability of specific wealth targets being achieved over a 20-year period when comparing investments with similar annual returns but differing volatilities. To perform his analysis, he leveraged a simple but powerful tool: Monte Carlo…

Know When to Hold’em, Know When to Fold’em

BLOG SERIES: RISK PARITY

In the second installment of this blog series on risk parity, we are going to dive into how dynamically adjusting the leverage applied to the strategy can result in increased stability of the portfolio’s return profile. Actively adjusting the amount of leverage applied to the portfolio is how the strategy scales the size of its bets based on changes in market risk.

How Strong Is Your Stomach?

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…

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…

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.

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.

Going the Distance: How to Conquer the Challenges Imposed by Liquidity Requirements

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.

Volatility, A Skewed Reality

BLOG SERIES: UNDERSTANDING RISK

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.

Preparation vs. Prediction

After a precipitous decline from February 19th to March 23rd, equity markets have rebounded significantly. Simultaneously, oil prices and volatility have experienced extreme fluctuations, central banks are implementing waves of stimulus, and governments are considering the relaxation of social distancing restrictions. This leaves many investors, including the famed and veteran varieties, unsure on a path…