This material is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.
Would you make an investment if there was another option offering better return potential for the same amount of risk or lower risk for the same level of return?
We’ve previously discussed managing risk through passive investments and diversification. But how does an investor compare risk between investment options?
The answer may be based in Modern Portfolio Theory. This investment framework seeks to maximize expected returns for a given level of risk. The Theory recognizes that the risk and return characteristics of a single investment should not be viewed on its own, but rather how it impacts the overall investment portfolio.
Diversification across multiple assets may lead to lower risk than owning a single investment. Modern Portfolio Theory takes this principal a step further by considering the relationship between investments. By investing in assets which are not perfectly related to each other, investors may be able to achieve the same portfolio expected return while managing risk.
Investment Property Wealth Management® helps bridge the gap between real estate investing and sophisticated wealth management. Taking into account an individual’s unique objectives and preferences, a Realized Portfolio™ incorporates Modern Portfolio Theory, which attempts to maximize your return relative to the risk you are comfortable taking, or manage risk relative to your target return.
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Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.
Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested.
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