Designing an Investment Portfolio

What’s one trademark of a poorly designed investment portfolio? The answer is a portfolio whose risk character is incompatible with the risk character of its owner. Frequently, these risk incompatibilities are camouflaged by a hot stock market. But when the market reverses and begins to fall like it has lately, the problems of investment portfolios with unsuitable risk levels becomes apparent.

On Wall Street, a cure is proving to be nearly as bad as the disease.[s]ome experts warn that the sums that have flowed into so-called risk-parity funds and exchange-traded funds, or E.T.F.s, over the last five years have become so large that the end result has been a riskier, more volatile market. Analysts estimate that there is currently around $4 trillion tied up in these investment strategies. The fear is that as their returns continue to suffer, a wave of investor selling will start a wider market rout as managers struggle to unload high-yield, high-return bonds and equities alike.

The stock market should be given the benefit of the doubt, according to two investment veterans with at least 50 years of experience each.

I’m referring to Sam Eisenstadt, the former research director at Value Line, and Norman Fosback, the former president of the Institute for Econometric Research and, more recently, editor of Fosback’s Fund Forecaster. Eisenstadt has been rigorously following the stock market for more than seven decades; Fosback has been a student of the market for “only” five decades.
To be sure, Eisenstadt is more bullish than Fosback is. But even he is focusing more on finding bargains than on building up cash.

--

--

--

ProfitableInvestingTips.com is an informational website for men and women who want to discover trading & investing products and strategies and how to use them.

Love podcasts or audiobooks? Learn on the go with our new app.

How Do You Start Investing in the Stock Market?

Profitable Investing Goals The Number One Tip For Making Profitable Investments

How do I get a good auto loan with a credit score of 640 but they day ?I

FANG Investments at Risk

FANG Stocks

Whats the first thing that comes to mind when I say CREDIT?

What Are At The Market Agreements (ATM)?

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Profitable Investing Tips

Profitable Investing Tips

ProfitableInvestingTips.com is an informational website for men and women who want to discover trading & investing products and strategies and how to use them.

More from Medium

How to deal with doubting the trading strategy and switching between systems?

Picking the Best Stock Investments

LEVERAGE — Sustainable force multiplier

Leverage (Physics)

Options Wheel Trading — Passive Income Generation