Finding Better Investment Trade-Offs

New Solutions for Mitigating Risk

Seth J. Masters, and Daniel J. Loewy, CFA, and Martin Atkin

The traditional approach to asset allocation relies on equities for growth and bonds for risk control. If a classic mix cannot deliver a return goal at an acceptable level of risk, investors face two unappealing choices. The first is simply to become more tolerant of risk; the second is to forego return, which requires investors to scale back on their spending or postpone their retirement. But a third, more attractive path for investors does exist: adopting a range of risk-management strategies that offer better trade-offs than the conventional approach.