A Holistic Approach to Risk Assesment
Although US stock indexes hit record highs in 2014, many investors opened their year-end statements and found much more modest results. Why did so many investors seemingly ‘underperform’ and, ultimately, fail to meet their expectations? While US stocks performed exceptionally well, most investors do not hold US stocks exclusively. Bonds, foreign investments, and commodities did not kept pace, and yet they are common components of diversified portfolios. The only investors that are exceedingly happy with their results over the last couple of years are those that are concentrated in US stocks. This trend leads to frustration and confusion among some investors as well as pressure on financial advisors. Those advisors serving as fiduciaries should address these challenges with the goal of delivering appropriate advice, but that is not always easy. When specific, higher-risk investments significantly outperform other assets, how should investors comprehensively assess risk to improve their investment decisions?
