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How To Measure Risk: 3 Ways

Excerpt from Brick Financial's December 2007 Client Letter: 

There are several goals we have in running our [Core] portfolio and if met will demonstrate its risk relative to the market. They are:
          1. limit the frequency of negative return 3 to 5 year periods,
          2. limit the magnitude of the loses in those losing multi-year periods relative to the market,
          3. limit the magnitude of “peak-to-trough” drops in value to 25% or less and fewer than once in any 3 to 5 year period.

…we have had no negative return 3-year periods easily passing the first litmus test of reasonable risk. [Additionally] the Core Portfolio has never lost to the market in any three year period since inception. Finally, in the five-plus years of the Core Portfolio’s existence, we have had one “peak-to-trough” period of greater than 25% lasting a period of four months. Just as the best investment managers have all had periods of year-to-year underperformance, they have had peak-to-trough losses of 25% or greater at least once or twice every decade or so. Once again, we are in good company.

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About Brick Financial Management, LLC

Blogged by Brick Financial

51 JFK Pkwy, 1st Fl. West
Short Hills, NJ 07078
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Brick Financial Management, LLC is a Registered Investment Advisor specializing in providing investment management services to individuals, families, organizations and institutions. We implement highly focused stock, bond, and balanced portfolios using an investment approach commonly referred to as value investing. Disclosure


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