Lesson 4.2

Two Ways Reduce Risk

  • Explain how reducing the Equity position lowers Risk at the expense of the Rate of Return in 5 Yr. Rolling chart
  • Explain why Standard Deviation decreases as the Equity position is reduced in 5 Yr. Rolling chart.
  • Compare 30 year values to 5 year values and notice how by holding positions for longer periods the Rate of Return increases while the Risk is significantly reduced. This is contrary to normal logic in the market.
  • Notice how the 30 year Standard deviation increases as the Equity position decreases.
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1 | 1.1 | 1.2 | 1.3 | 2 | 2.1 | 2.2 | 2.3 | 2.4 | 3 | 3.1 | 3.2 | 4 | 4.1 | 4.2 | 4.3 | 4.4 | 4.5 | 4.6 | 5 | 5.1 | 5.2


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