Risk Management Wins Again

September, and the third quarter, mercifully are behind us. You’ve probably seen the data, so I won’t repeat them in detail. Stocks had their worst month and quarter since the financial crisis. Investors generally fared poorly. But our Retirement Watch recommended portfolios held up well. Thefour  portfolios’ returns for September ranged from negative 0.45% to negative 2.12%. All the portfolios have positive returns for the calendar year and for 12 months. We’re also only about 5% short of the 2007 peaks. (I’m excluding the hedge fund portfolio and Invest with the Winners portfolio in this summary.)

We did this by following the principles that have given us superior risk-adjusted returns for years. We manage risk first and seek returns second. The returns and long-term growth will take care of themselves if we avoid the largest losses. We avoided large losses by reducing or removing risk from the portfolio as assets became more risky. We’re now focused on a few investments that have held up better-than-average during the downturn and a few that actually rose while broader market indexes declined, such as Vanguard Long-Term U.S. Treasury bond and Hussman Strategic Growth. We almost always seem to find a few of those.

If you’re unhappy with your investment returns, consider becoming a member.