For all the talk of risk in the academic world, it’s the real world that provides the best answer to what risk really is and how to avoid it. How do your thoughts on this compare with others?
Tag "Modern Portfolio Theory"
This elegance earned a Nobel Prize for several smart professors. You must forgive them, though, for they had a far limited toolkit to work from. Still, this was the original source from which “risk” sprang.
Ultimately, if you want to protect yourself and others from making simple mistakes, you must embrace the sin that first birthed those missteps.
The proliferation of investment options promised participants a plug-and-play plan. In the process, it created a 401k Frankenstein monster of a mess.
A good fiduciary must keep a level head and know when emotions drive investors. After all, if they’re not careful, emotion will drive investors right off the cliff.
Why are financial professionals more likely to embrace behavioral finance and how can this help the average investor?
The GOT system offers a viable and practical alternative to relying on outdated MPT tools. Although still widely in use, MPT-based calculators and analyzers can sometimes lead retirement savers to make decisions that aren’t in their best interest. That statement alone should trigger concerns from the mindful fiduciary.
So one wants his epitaph to read “Here lies John Doe. He beat the S&P 500.” There needs to be an easy-to-understand and easy-to-implement system that properly reflects both your goals and the consequences of failing to meet those goals. Retirement savers want and need a system that represents a better way to set and meet retirement goals.
Many professionals and most of the current generation of finance professors have long ago removed “risk” from their investment decision-making algorithms. These forward-thinking folks recognize the greater importance of managing retirement saver behavior over managing irrelevant investment risk as it pertains to meeting or exceeding the goal of retiring in comfort.
FiduciaryNews.com Trending Topics for ERISA Plan Sponsors: Week Ending 12/1/17
New thinking, delay of game, and moving (too far?) ahead.