The week has shown a return of volatility and, in my view, this will be a fairly common event in 2015. This update is dedicated to addressing our rational approach to these markets.
Here you go,
Risk and Return
Prudent investing is a rational process. It involves deciding how much risk to take, then choosing asset classes to match an investor’s preferred risk-return tradeoff.
Securities are fairly priced in liquid and competitive markets.
Diversification is essential.
Investing involves trading off risks and costs with expected returns.
Last year had it’s moments of extreme volatility too and most investors were able to participate in what ended up being a very good year for U.S. equity markets. We believe 2015 will be similar in terms of needing to be rational through the days like those in this week knowing that:
In liquid markets, prices reflect all available information.
We focus strategies on the dimensions of higher expected returns.
We seek to add value through portfolio design and implementation.
Until next week
Susan R. Linkous
Note: We look forward to working closely with Dimensional Fund Advisors this year to efficiently implement above strategies. Please remember that no single strategy protects against loss.