Jan. 23, 2020

Hope for the Best. Prepare for the Worst

Article — Overview

Misconceptions about Bear Markets, Portfolio Construction, and Risk

The fall of 2018 marks a decade since the darkest days of the Financial Crisis of 2007-09, and investors remain justifiably scarred by the calamity. The passage of time, however, offers the opportunity to assess what went wrong and how to avoid repeating past mistakes.


Intelligent, rational investors made some missteps prior to the crisis that resulted in significant losses of wealth. Many of the missteps are a result of popular misconceptions regarding major market events, diversification, and risk.


Unfortunately, many years later, these misconceptions still lay at the foundation of portfolio construction and expectations. 


Identifying and understanding these misconceptions can help redefine portfolio construction and risk management, so investors can be better prepared for the next major market event.