Disruptive Investing

Risk is hard to define and even harder to measure. Because you can’t manage what you can’t measure, you cannot manage risk. You can only attempt to weed it out. Various selection processes and trading tactics can help reduce many types of risk. What is a useful definition of risk as applied to mutual funds? It is the probability of or chance of the loss of capital. It is this probability and its potential causes that create so much trouble. People disagree on what to measure and further can’t agree on how to measure it. Do we use standard deviation, semi-variance, maximum drawdown, value at risk, downside deviation or estimated tail loss? Do any of these truly explain risk or account for it completely? This places investors in jeopardy of loss of capital, because they’re placed into positions of risk they do not understand. Without understanding there's no plausible means of managing money effectively. This means there's always a chance of loss of capital, no matter how well co...

The American Recovery and Reinvestment Act 2009 has been passed as of Friday, February 13, 2009 ( ARRA 2009 ). It contains numerous investments (i.e.,government spending) in infrastructure, science, healthcare, education, energy, and protecting the "vulnerable". How will this affect consumerism? Sustainability? Green initiatives? Where will people demand their money be invested? Which industries will be supported by the act and which will slide? How will this impact the way money managers make decisions, rebalance portfolios, establish new strategies? What are the best mutual funds to invest in for 2009? Will it be large cap or small cap, international or domestic, growth or value, aggressive or conservative, or emerging markets?

EARN MORE! RISK LESS! Diversification weighting, is a product of diversification optimization (of a portfolio). Allocation weights can be determined by the extent to which an asset adds uniqueness to a portfolio. Some studies show that using diversification weighting, rather than risk-based weighting, or capitalization weighting, could improve relative performance while decreasing portfolio volatility.