Construction Methodology for Optimal Portfolios - Part Two
Risk is one of investors most misunderstood words. Hearing it can produce sentiments of fear, often paralyzing individuals from taking action. The cruel irony is that inaction also comes with inherent risk as well!
Volatility (risk) is the cost of admission to the game of investment. The return you get is the reward for bearing risk. Accepting this premise, prudent investors will do well to ask the question - “Am I being compensated fairly with a reasonable return for the degree of risk that I bear?” This is a question that investors overwhelmingly neglect to ask themselves. Often investors are paying first class prices (high volatility) for sub-optimal outcomes (lower expected returns).
What's on the Horizon for Property Markets
The great Australian dream has been said to own your own home. Not too long ago, Japan shared this dream, before it quickly became a nightmare. Are there any lessons that can be derived from what has gone down in infamy as one of history's greatest property busts.
Fundamentals of Investment Risk
As the calendar year draws to a close, investors will do well to reflect on the year that was. Geopolitics, inflation, and rate hikes across the globe are only some of the influences that have impacted portfolios, creating one of the most challenging years for investors in recent memory. Seasoned investors know that risk comes with the territory.
Understanding risk is an absolute must for investors who desire to benefit from good times while retaining the resilience to withstand the bad.
Let's Get Back to the Fundamentals
It has been said that the four most dangerous words in investing is “it’s different this time.” Approaching the end of one of the most challenging years on record in the share market, it’s important to remove ourselves from the fog and review some time-tested investment fundamentals. Is it really different this time?
Navigating the Tempest of Markets
Evidence shows how portfolio construction can capture the return of markets most efficiently. Unfortunately, there is a business imperative of the professional investment community in selling something that has a far lower chance of success. Without clear confidence in appropriate expertise the investor is rudder less in the tempest of the markets.
The Quality Portfolio Demands Quality Time
The investment landscape is rife with inconvenient truths. One such truth is that money managers by and large fail to deliver value over and above freely available market rates of return over time. If this was widely understood by investors, then many financial advisers, fund managers and superfunds would be out of a job. Too often consumers are intoxicated with promises of high returns by sprookers and salesmen serving their own self-interests. A sober mind is needed that looks to the evidence and quiets the noise.
Bringing Perspective to the Investment Environment.
Building an investment portfolio is like creating an oil painting. There needs to be a sense of depth and perspective for it to be a success. A portfolio that lacks a three-dimensional profile has returns that are dull and flat, like the primer coat on a painter’s canvas.