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Return and Risk - Audio Clip

You don't always end up seeing the risk that you take. When you do it's often too late to do anything about it.

Transcript

Eric: Optimal means, everyone is going to have a different definition of optimal. For me it’s finding the right balance between the pursuit of annualized return against how much downside risk am I actually taking.

That downside risk that you’re taking is a very subjective thing. And I feel like I’ve put tremendous effort into understanding not just the risks we see but the risks that we’re taking that we don’t see. We just see the tip of the iceberg. It’s whatever happened: the market was down, people are down 20% YTD. That’s the risk they see, but the risk they’re taking is something different.

You don’t always end up seeing the risk that you take. When you do it’s often too late to do anything about it.

The optimal portfolio to me is one that maximizes your compounded annual growth rate relative to the risks that you’re taking, even those infrequent but catastrophic risks.

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