Return versus Risk

A primary goal of prudent investing is to minimize risk for any sought rate of return, and correspondingly maximize returns for any given level of risk.

A graphical representation mapping investment returns of all securities and portfolios leads to what is commonly referred to as “the efficient frontier”. This frontier represents portfolios that provide the least level of risk, estimated by their standard deviations,  for any given expected return. Most securities and combinations thereof fall below and to the right of that line. It is rare that a portfolio manager achieves a long term record with a risk/return relationship above and to the left of this line.

Over the past 7 1/4 years, Byrne Asset Management has produced just such results – higher than average returns with less-than-normal volatility. Some managers outperform the market by taking more than usual risk. We have outperformed the market both on an absolute basis and on a risk-adjusted basis.*

Contact us to learn more.

Sources

Large Cap Stocks – Vanguard S&P 500 Index Fund, which tracks the Standard & Poors 500 Index
Small Cap Stocks – Vanguard Small Cap Index Fund, which tracks the MSCI U.S. Small Cap 1750 Index
All U.S. Stocks – Vanguard Total Stock Market Index Fund, which tracks the MSCI Broad Market Index.
Rates of return are compounded annual growth rates from January 1, 2001 to March 31, 2007.
Standard deviation** calculations are based on quarterly returns for the same period.
* Past performance is not necessarily indicative of future performance. Results for individual clients may vary. Results are not audited. Byrne Asset numbers reflect the addition of certain dividends and deduction of all fees.
** Standard deviation is a mathematical measurement of volatility. If A has returned 5% each of the past 2 years, and B has returned 10% last year but 0% this year, they would both average 5% returns but B would have a higher standard deviation.  Click here for more details at Wikipedia.