The returns vs. risk battle is the front line of investing. Everyone wants higher returns, but at the same time, lower risk. The two are seen as mutually exclusive and directly related to each other. Here at Altruistic, we disagree. We believe you should grow your money faster by taking less risk. You’ve probably heard of the saying, “don’t keep all of your eggs in one basket”. This is a very simple saying to illustrate the concept of diversification or Modern Portfolio Theory (MPT).
MPT is the idea that owning different kinds of financial assets (stocks, bonds, and cash) is less risky than only owning one type. It assumes these assets move on a teeter totter and therefore balance your portfolio when one asset class is falling in value. Problem is, things don’t always work out as planned like the 2008-2009 crash when stocks, bonds, and real estate were falling at the same time. We would like to let you in on a little secret….MPT is the bread and butter of almost the entire financial industry. This is the “secret sauce” everyone pays for. The truth of the matter is, MPT was introduced in 1952. Let that sink in. A majority of financial advisors and all “robo” advisors use the same investment philosophy their predecessors have used for the last 65+ years.
At Altruistic, we are more concerned with proper diversification by maintaining non-correlated assets! What does that mean? If stocks and bonds start moving up or down together in tandem, we use dynamic risk hedging to restore balance to the portfolio. Our goal is to help you lose less in down markets and keep more of your hard-earned money to keep invested in up markets. In turn, by taking less risk you increase your potential for higher returns and smooth out the roller coaster we have all come to know as the stock market.