Risk Reduction Portfolios
Much of the debate between active and passive investing is about whether a mutual fund manager can beat it's respective index. While this is an important debate and consideration when building a diversified portfolio, it does not address how to protect a portfolio during significant declines and black swan events such as 1929-1932 Great Depression, 1966-1982 Stagflation, 1987 Black Monday, 2000-2002 Tech Bubble, 2007-2009 Financial Crisis / Great Recession, and the next major bear market that has yet to come.
During a typical market decline, the major asset classes such as large cap, mid cap, small cap, international, emerging market etc., all move together (high correlation). True diversification means having asset classes that are going up when everything is going down which also means having something go down when the rest of the portfolio is going up.
We believe in using Robust Loss Avoidance strategies that are designed to minimize the damage from significant declines. These strategies, when combined with traditional approaches have the potential to increase long-term return while simultaneously reducing risk. While there is never a guarantee of success or any particular outcome, history has shown that including Loss Avoidance strategies can reduce the overall volatility of a portfolio.
If you would like to see a historical hypothetical illustration of how this works, schedule a free Portfolio Risk Analysis consultation.