Investment Philosophy Risk Spectrum
Risk Spectrum

Learn more about the basic elements of risk and return that drive HonorVise portfolio engineering.

Risk vs. Return

The relationship between risk and return is not a mystery.  Asset classes with a higher expected return (e.g. small cap stocks) are more volatile or risky than those with a lower expected return (e.g. U.S. T-bills).  In finance, the preferred method of measuring volatility of returns is standard deviation which is plotted against simulated model portfolio returns in the graphic below.  In order to achieve higher returns, investors must be willing to accept higher volatility (risk) of returns.  But not all risks provide the same level of reward.  Through study of financial science, HonorVise has developed a powerful understanding of the risks that are worth taking and those that are not.

HonorVise Portfolios 1-20:  20-Year Annualized Returns Plotted Against Standard Deviation 

HV_Risk-Spectrum
 

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Investment Quotes
  • "Any chance that mutual funds as a group could outpace a suitably weighted market index (including large and small stocks alike) is, simply put, ‘gone with the wind.'"

    ~Jack Bogel, Vanguard, Ex-Chairman
  • "The only way an investor can get killed is by high fees or trying to outsmart the market."

    ~ Warren Buffett
  • "The stock market is designed to transfer money from the active to the patient."

    ~Warren Buffett
  • "The S&P index benchmarks outperformed their active peer funds in all nine Morningstar style boxes over the past ten years."

    ~Gus Sauter, Vanguard Group
  • "The only consistent superior performer is the market itself and the only way to capture the superior consistency is to invest in a properly diversified portfolio of index funds."

    ~Rex Sinquefield, Director, Dimensional Fund Advisors
  • "For most of us, trying to beat the market leads to disastrous results."

    ~Prof. Jeremy Siegel, author
  • "It is basically impossible to beat the market."

    ~Prof. Eugene Fama
  • "I was not always an obnoxious indexing zealot. Ten years of believing in and selling active management strategies in the brokerage industry made me this way."

    ~Rick Ferri,CFA, author, financial adviser

  • "The media focuses on the temporarily winning active funds that score the more spectacular bull's eyes, not index funds that score every year and accumulate less flashy, but ultimately winning, scores."

    ~W. Scott Simon, author
  • "A low-cost index fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and everything I have seen since convinces me of its truth."

    ~Warren Buffett
  • "Only about one out of every four equity funds outperforms the stock market. That's why I'm a firm believer in the power of indexing."

    ~Charles Schwab
  • "Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 oupaced the market by more than 1% a year. These are terrible odds."

    ~Jack Bogle
  • "The fund industry's dirty little secret: most actively managed funds never do as well as their benchmark."

    ~Arthur Levitt, Chairman, SEC