In an effort to make many of the concepts that we utilize more accessible to financial advisors and their clients, we have endeavored to create series of “1-pagers”: single page educational materials highlighting and covering a single topic.
The first series we are releasing is on drawdowns is accessible via the links below.
There are five installments in the first series:
- What is Drawdown: Explains the concept of drawdown and max drawdown
- Drawdowns & Withdrawals: Explains the importance of drawdown control, especially for portfolios in the withdrawal phase. Provides an example of how withdrawals during drawdown can cause irreparable harm to long-term portfolio growth because they lock in losses
- Is Static Enough?: Explores the implications of utilizing a static portfolio, even under the assumptions of long-term expected returns and volatility estimates. The probability of large drawdowns may be higher than you think!
- Methods of Drawdown Control: Covers several methods of controlling drawdowns, including volatility management, put options, the momentum methodologies, and demonstrates the effects of each methodology on the resulting return distribution
- The Cost of Drawdown Control: Re-frames the concept of drawdown management techniques into non-guaranteed downside insurance with (potentially) lumpy premiums (costs). Helps provide clients with a realistic understanding of risk management offerings and their associated costs.
Comments are always appreciated.