The Investment Scientist

Archive for November 2010

MZ Capital 60/40 Model

MZ Capital 60/40 model vs S&P 500

Once I asked a prospective client how he managed investment risk.

“Well,” he intoned, “I try to get in before the market rallies and get out before it tanks.”

It is not just lay investors who have this misconception about risk management; many financial advisors equate risk management to market timing as well. One only needs to watch those advisors talking on CNBC to see that many of them are in the fortune-telling business.

So how do I manage risks? There are three steps.

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.

Twitter: @mzhuang

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