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Higher Returns with Less Risk
If you are a retiree, you were likely gripped with fear and anxiety when the market crumbled in 2008. I was! I knew that I could not live off the meager fraction of a percent that I received from “safe” Certificate of Deposits (CD). Over the long run, I knew I would need the higher return from stocks. But I could not afford to lose my retirement stake. I was frozen with indecision!
I am a retired engineer with a PhD in mathematics. So I thought maybe I could devise a way to lower the risk of the stock market but still make a livable return. I began searching the literature.
It turns out that a fellow named Markowitz had found a solution over 50 years ago. He made the amazing discovery that if you combined certain types of high risk assets (such as gold or commodities) with low risk assets (such as bonds and utilities), you could construct a portfolio that would give you a rate of return that exceeded that of the stock market but with substantially less risk. His work was so revolutionary that he was awarded the Nobel Prize! He called this strategy Modern Portfolio Theory (MPT).
So I implemented MPT in my own retirement accounts and since then, I have been able to sleep more soundly.
Step by Step Tutorials
I know that as a busy professional, you may have never had the time to learn the ins and outs of investing. You may have relied on your broker or other professionals for advice, which is fine. However, if you would like to learn more, I will be providing a series of basic tutorials (as well as videos) that attempt to explain in plain English what all the Wall Street jargon really means.
If you are already an experienced investor, I will also provide some more advanced articles discussing such topics as options, hedging, portfolio insurance, and stop loss techniques. I hope you will find these informative and I welcome your feedback.
What does this site offer?
Using these tutorials, I will show you how to tailor portfolios to achieve your investment objectives. To provide a starting point, I have developed several example portfolios that make use of Modern Portfolio Theory. You are free to tailor these portfolios in any way you like to match your own unique risk profile. To view these example portfolios, all I ask is that you click the “Join Now” button and register for the site. This will provide me with you email address and I may contact you from time to time but, I promise that I will not abuse your time or privacy.
If you don’t want to register, that’s fine also. You can still view over 80% of the site. Before I became an engineer, I wanted to be a teacher. I love teaching and have developed some tutorials that I hope you will find useful.
Don’t get me wrong. MPT is not the Holy Grail that will earn you gobs of money with no risk. After many years of searching, I now know that the Holy Grail does not exist. You have to take some risk to earn a return. I just wanted to make this risk as small as I could.
The portfolios that I have constructed are based on past performance, and as the saying goes, past performance is not an indicator of future performance. Also, I am an engineer, not a registered investment advisor, so do not assume that what is right for me is also right for you. Always consider the risk before you enter into any investment decision. See the legal disclaimer on the site for more caveats.
The bottom line is I believe you can become your own portfolio manager. This site will provide helpful tutorials and example portfolios. The example portfolios were constructed to provide higher returns with less risk. I offer them to you as a starting point. However, you, and only you, must determine if a particular portfolio is right for your investment situation.
I hope you will bookmark this site and view some of my tutorials and portfolios. I will try to make them interesting as well as informative. If you like this site, please tell your friends. Thanks and may all your investments be profitable!
7% Income with Lower Risk and High Return
As an example, I constructed an “ideal” portfolio that had the following characteristics:
- Income of at least 6%
- Total return comparable to the S&P 500
- Volatility less than the S&P 500.
Please click on the link below to see details:
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Sleep Soundly Portfolio
Click on the box in the bottom right of the page for information on a unique experiment that will result in a Sleep Soundly Portfolio
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