Morningstar Advisor - April/May 2013 - (Page 50)
Morningstar Conversation
Risk’s Wake-Up Call
By Hal Ratner
Investors can take precautions, but at some point, they need
to realize that no one can predict the future.
Risks always have been part of the investing
equation, but the shock of the 2008
financial crisis was a wake-up call for many
investors who assumed that modern
financial markets had been built to prevent
such deep drop-offs. In fact, what are rarer in
the history of markets are long periods of calm.
As investors have come to grips with this
reality, they are seeking ways to moderate the
effects of the meltdowns of the future.
But are investors thinking about risk in the right
ways? Is it even possible, or advisable,
to try to build a portfolio that can withstand
50 Morningstar Advisor April/May 2013
whatever bad event will next hit the markets?
To discuss these issues and others, we
invited two professional investors who think
about risk every day to discuss their views.
Joseph Davis, who has a Ph.D. in economics, is
the head of the Vanguard Investment Strategy
Group. Dennis Stattman, CFA, managing
director and portfolio manager, is the leader of
BlackRock’s Global Allocation team. Our
conversation took place Feb. 26 and has been
edited for clarity and length.
Hal Ratner: I’d like to start off our conversation by getting from both of you a definition
of risk and how it should be viewed in an
investment framework.
Dennis Stattman: The most important things
that I can say about risk are that it’s key
to look at it from a number of different
perspectives, to look at a lot of measures, and
then also to look at risk qualitatively. In the
Global Allocation fund MDLOX and on
the Global Allocation team, we never lose sight
of the idea of risk as being the chance of
Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2013
Morningstar Advisor - April/May 2013
Contents
Contributors
Letter From the Editor
The Pursuit of Happiness and Financial Advice
What Strategies Do You Use to Control Risk?
Driven to Succeed for Clients and Family
How to Assess a Portfolio’s Bond Risk
Luck, Skill, and Investing
Investments á la Carte
Investment Briefs
Investing’s No- Brainers Have Costs
A Defensive Ride
Risk On/On Risk
The Risk of Being Overconfident
Year of Living Dangerously
The Risk-Parity Approach
A Guide to Mutual Funds Running Risk-Parity Strategies
What Moats Tell Us About Risk
Risk’s Wake-Up Call
Seeing Is Believing
Why Investors Lag the Returns of Their Funds
Liquidity Signals
Pump Them Up
Golden Oldies Keep on Truckin’
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
Our Social Blind Spot
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