Tagged: risk management

Deep Risk – New Book from Bill Bernstein

Bill Bernstein, author of investment classics such as The Four Pillars of Investing, has released a new book called Deep Risk. In his own words: Deep risk: How History informs Portfolio Design is the third installment in the investing for adults series. this series is not for novices. This booklet takes portfolio design beyond the familiar “black box” mean-variance framework. Most importantly, the short-term volatility of financial assets, commonly measured as standard deviation, is a highly imperfect measure of the...

Mebane Faber Compares Eight Portfolios

A recent blog post by Mebane Faber compares eight different asset allocation strategies. In his comparison, the Permanent Portfolio did not have the highest returns (it likely never will), but it had by far the lowest drawdown/volatility of them all (-12.7% compared to -30% or worse). So the Permanent Portfolio gave the smoothest ride to get those returns. As we’ve covered before, I feel a portfolio with low volatility is very important for controlling investor emotions and ultimately achieving higher returns. A lot...

Drawdowns and the Permanent Portfolio

Let’s talk portfolio drawdown and investing risk. A drawdown in the sense of an investment portfolio is basically a loss it has experienced in the past. In particular, a lot of people are concerned with maximum drawdowns. This can give an investor a good idea about how an investment has done in the past so they can perform a gut check on themselves. For instance, a maximum drawdown for a 100% stock portfolio has approached -90% during the Great Depression....