Risk or Return
- Risk as a natural corollary of return
- How can risk be measured?
- Qualitative risks unkown
- Buffers and alternate plans
- Asset Allocation to mitigate risks
Risk – Return Tarde Off
In the last 30 years, the average return has been the following:
What would you tell the investor to expect for the next 3 years?
Distribution of Return
Articulating Risk
Implications to the Investor
- Required return much different from actual return
- Inability to fund the financial goal
- Difficulty in forming return expectations
Why Asset Allocation?
- Portfolio risk is always lower than the weighted average of components
- Asset class performance matrix offers no predictable pattern
- Diversification is the only free lunch
Qualitative Risks
Buffers and Alternatives
