Your Take On

uraa-quartely.blogspot.com
Unusual, but not without precedeny Thomas Alley, senior vice president of investments, , Denver “As a resulft of recent markets andcurrent events, it may seem naturap to question the continuing relevance of modern portfolio theory and the asset-allocatiob principles that subsequently emerged from it. Theories, naturap or financial, are not immune to but act as an explanation to how systemsagenerally work. The behavior of the markets in 2008 washistorically unusual, but not without precedent. Our plans should be informe byhistorical patterns, not by their Consequently, we continue to urge investors to remaibn broadly diversified consistent with their tolerance for risk.
" Scotft Brooke, director of retirement plan services, , Denver “MPT isn’t dead, just misused. Throughout time, an portfolio containing different components from the variouas assetclasses — stocks, bonds, cash and alternated investments — reduces risk. Don’t confusr this with ‘diversification.’ There is a profound difference betweehn your assetallocation ... and deciding whicg investments to include in eachasset class. As 2008 showecd us, simply adding more investments to aportfolio doesn’t reduce its risk ...
Skipping any one of the four assets classes is what causes most portfolios to Warren Olsen, chief investment officer, , Denver “The premisew there was a ‘meltdown’ in modernn portfolio theory is not correct. While equities were they are just one asset bonds actually held upreasonably well. In there are six broad asset classes: listed private equities, bonds, cash, real assets and absolutew return strategies. Combined properly, thes investments produce an portfolio. Many investors misunderstand the correlation and risk embeddexd in theirportfolios — there is a limi to how much you can minimize risk when you investr in a limited number of categories.
Investors need disciplinr to stick witha well-constructes portfolio through difficult markets to produce superior risk-adjusted Paul R. Harrison, certifiec financial planner and adjunct professorat , Denver “Panic ! No amount of theoryh or strategy can save your investment You have two choices: Ride it out or know it’s comingb and get out of the way. Absent a crystal ball, most investors will have to rideit out. Modernb portfolio theory (MPT) has taken a beating, alontg with just about everyone’s portfolio over the last butthat hasn’t invalidated the MPT works best in uncorrelated marketw or normal times.
During a down market and especially ina panic, markets become more correlated, meaning all goinh down together. Nothing works well in a