A Quote by Harry Markowitz
Diversifying sufficiently among uncorrelated risks can reduce portfolio risk toward zero. But financial engineers should know that's not true of a portfolio of correlated risks.
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The trick is to take risks and be paid for taking those risks, but to take a diversified basket of risks in a portfolio.
There is one thing of which I can assure you. If good performance of the fund is even a minor objective, any portfolio encompassing one hundred stocks (whether the manager is handling one thousand dollars or one billion dollars) is not being operated logically. The addition of the one hundredth stock simply can't reduce the potential variance in portfolio performance sufficiently to compensate for the negative effect its inclusion has on the overall portfolio expectation.
When large companies take on risk, then they impose risks on the rest of the system. And these are systemic risks and these systemic risks we never used to think were really that important, but as soon as we recognize how the financial sector - the risks the financial sector takes on can impact the entire global economy, we realize that those risks needed to be controlled for the social good.
An indoor (or backseat) childhood does reduce some dangers to children; but other risks are heightened, including risks to physical and psychological health, risk to children's concept and perception of community, risk to self-confidence and the ability to discern true danger
When you sell options, you get paid for assuming risk. That can be a profitable business, but it does not mix well with the risks inherent in a leveraged portfolio.
The trouble is that the risks that are being hedged very well by new financial securities are financial risks. And it appears to me that the real things you want to hedge are real risks, for example, risks in innovation. The fact is that you'd like companies to be able to take bigger chances. Presumably one obstacle to successful R&D, particularly when the costs are large, are the risks involved.
In choosing a portfolio, investors should seek broad diversification, Further, they should understand that equities--and corporate bonds also--involve risk; that markets inevitably fluctuate; and their portfolio should be such that they are willing to ride out the bad as well as the good times.
To reduce risk it is necessary to avoid a portfolio whose securities are all highly correlated with each other. One hundred securities whose returns rise and fall in near unison afford little protection than the uncertain return of a single security.
While it may be theoretically possible to demonstrate the risks inherent in any treaty... the far greater risk to our security are the risks of unrestricted testing, the risks of a nuclear arms race, the risks of new nuclear powers.
One should have a wide variety of assets in one's portfolio. And oil, by the way, is a particularly important asset to have in one's portfolio because we need it, and the economy thrives on it.
I will keep a substantial long exposure to gold -- which serves as a Jelly Donut antidote for my portfolio. While I'd love for our leaders to adopt sensible policies that would reduce the tail risks so that I could sell our gold, one nice thing about gold is that it doesn't even have quarterly conference calls.
This is boxing. As fighters we know the risks, we know we are risking our health everytime you step into the ring, but it's a risk we are willing to take because we know with those risks come great reward.
Congressman Frank and Senator Dodd wanted the government to push financial institutions to lend to people they would not lend to otherwise, because of the risk of default. ... The idea that politicians can assess risks better than people who have spent their whole careers assessing risks should have been so obviously absurd that no one would take it seriously.
The thing is doing it, that's what it's all about. Not in the results of it. After all what is a risk? It's a risk not to take risks. Otherwise, you can go stale and repeat yourself. I don't feel like a person who takes risks. Yet there's something within me that must provoke controversy because I find it wherever I go. Anybody who cares about what he does takes risks.
The most important thing you can have is a good strategic asset allocation mix. So, what the investor needs to do is have a balanced, structured portfolio – a portfolio that does well in different environments…. we don't know that we're going to win. We have to have diversified bets.
Portfolio theory, as used by most financial planners, recommends that you diversify with a balance of stocks and bonds and cash that's suitable to your risk tolerance.
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