| |
Hi Do, Here are Todd’s latest fun picks to take your financial skills to the next level... The market bubble rages on, so risk management is paramount.
Your risk management discipline must be in place before the downturn begins. Waiting until after the horse leaves the barn is too late.
Please note that my definition for risk management extends beyond the confines of conventional diversification and risk dilution principles. You probably already have that stuff in place. No problem.
But it has limited value because major market downturns following bubbles are different. Correlations between all asset classes tend to rise toward one (all assets decline at the same time).
Conventional risk management is insufficient in those situations. We saw the first inkling of that problem in the March 2020 decline when bonds fell at the same time as stocks so there was no diversification benefit. That's what happens when interest rates are so low.
So let's explore a few resources to help you better manage risk...
Reality is stranger than fiction. Edelman Financial Engines is one of the biggest RIA's in the country with a pile of clients concerned about protecting their portfolios from market risk. The only problem is they have no proven solution. So what does Edelman do instead? They resuscitate the failed portfolio insurance programs offered in the mid-1980's that ultimately caused the 1987 stock market collapse. Good for them because they can charge a fee for it, but bad for clients because the math behind it is fatally flawed. It would be laughably funny if it wasn't so tragic and concerning. The methodology they're promoting has no proven positive expectancy. It has no way to get back in after the decline is over to participate in the subsequent rise. There's no statistically valid exit or entry point. If you want a proven solution that manages market risk, has proven positive expectancy in both rising and declining markets, and can increase your safe withdrawal rate in retirement by 50% or more, then click here to see the solution my Expectancy Wealth Planning course students have already been happily using through both bull and bear markets. This quick read makes an important point - the risk management solution you adopt must focus entirely on process, not outcome. Positive outcomes result from following a valid risk management process with discipline. Conversely, outcome based thinking distracts you with low probability, non-repeatable, random luck. Focusing entirely on valid investment risk management process assures a winning outcome in 999 out of 1000 lifetimes - no luck required. Which would you prefer? The solution I've used for my entire adult lifetime to produce reliable positive expectancy through wide-ranging market conditions over 40 years is available now as an online software solution. I don't agree with all the conclusions in this article, but it makes some important points you need to understand, plus the research data provided makes it worth including. The article shows how you need a valid long-term investment plan (defined as provable positive expectancy) that you follow with discipline - including the inevitable periods of extended adversity. The way they explain the adversity issue is important, but I disagree with their research showing 10 years of adversity as acceptable. Proper risk management should reduce under-performance to 2-3 years. 10 years is only because of failed risk management. Also, their conclusion that broad asset diversification is the solution is also incorrect. The correct solution is to manage the risk of extended under-performance in each asset. I teach how to do that for all asset classes in my Expectancy Wealth Planning course, and I provide a done-for-you solution for paper assets here.
Onward and upward!
Todd Tresidder
I used this solution to run my hedge fund for 12 consecutive years without a losing year. And I've used similar to run my own assets for 40 years, and will continue running my assets this way for the rest of my life. It just plain works. And now, it's all simplified and done-for-you in an online software package. It manages risk, increases expected returns, and increases safe withdrawal rates by 50% or more. Not bad for just $400 per year, eh? |
|
P.S. Did someone forward this issue to you? We’d love to have you join us by signing up here.
To make sure you keep getting these emails, please add todd@financialmentor.com to your address book or whitelist us. Want out of the loop? Unsubscribe.
Our postal address: 1480 Marsh Avenue, Reno, NV. 89509 |
| |
