Measuring the "Hazards" in Your Portfolio

Have you ever been driving on a long road trip and everything is going fine until something suddenly goes wrong?

Maybe a large thunderstorm creeps overhead, making it hard to see even right in front of you. Or perhaps there’s been an accident, causing traffic to back up for miles.

These are circumstances beyond our control and challenging to plan for, but we know they happen.

A similar situation applies to your investment portfolio risk. Many people invest in a “standard portfolio,” which may include 60% equities and 40% bonds. Others might assume more equities but maintain a high level of correlation between their holdings.

This leaves you vulnerable to encountering a “thunderstorm” or an “accident” within your portfolio. Just like the road hazard, we do not know when or how it will occur, but history has shown us it will, and when it comes, we want you to be ready for it.

Watch this week's video by clicking here.

Investment Allocation and Selection: Portfolio risk arises from how you allocate and select investments within it. These choices should align with your investment timeline and goals.

Variance Drag Phantom Tax (VDPT): VDPT measures the risk in your portfolio by comparing your rate of return with your standard deviation.

Impact of Volatility on Compounding: Frequent ups and downs in your portfolio disrupt compounding, which can harm your long-term returns.

Thank you for reading this week’s “Making Sense with Ed Butowsky” article. To view the rest of Ed’s articles,?you can click here?or you can also check out Ed’s personal website to learn more about him.?

For more information, email Jordan McFarland at?[email protected].

Chapwood Investments, LLC is a SEC Registered Investment Advisory Firm. No mention of a particular security, index, derivative or other instruments in this material constitutes an opinion on suitability of any security. The information and data in this material were obtained from sources deemed reliable. Their accuracy and completeness are not guaranteed. At any given time, principals at Chapwood Investments, LLC may or may not have a financial interest in any or all of the securities or instruments discussed in this material. The guests appearing in material do not receive compensation or provide endorsements or testimonials. Past performance is not indicative of any future results.

Calculators are hypothetical examples used for illustrative purposes and do not represent the performance of any specific investment or product. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return also involve a higher degree of risk of loss. Actual results will vary.? We strongly recommend that you seek the advice of a financial services professional before making any type of investment.