February 15, 2012
"Risk means more things can happen than will happen." - Elroy Dimson
"Investing consists of exactly one thing : dealing with the future. And because none of us can know the future with certainty, risk is inescapable. Thus, dealing with risk is an essential-I think the essential-element in investing. It's not hard to find investments that might go up. If you can find enough of these, you'll have moved in the right direction. But you're unlikely to succeed for long if you haven't dealt explicitly with risk. The first step consists of understanding it. The second step is recognizing when it's high. The critical final step is controlling it." - Howard Marks
So, how do I suggest my clients deal with risk? First, I practice Modern Portfolio Theory. The first thing I need to know about a client is how risk tolerant they are. The second thing is their financial goals. That's why I walk everyone through a process we call Envision Planning. With these building blocks in place, I can develop with my clients the right asset allocation - that is the right level of risk - for them. From that, I can utilize Modern Portfolio Theory to help maximize gains given the level of risk determined by our planning. It's a prudent and thoughtful system I stand by.
If you are interested in my approach on how to deal with risk to optimize your returns, please contact me at 585.340.2212 or by email at mfrancis@brightonsecurities.com.
Mike Francis Vice President Brighton Securities
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).