Return and Risk are Related

The long term history of capital markets clearly demonstrates that return and risk are related.

Cash investments like Treasury Bills and bank Certificates of Deposit have low returns because they have low risk. Owning only cash investments subjects an investor to inflation risk.  Interest is the primary return component from bonds.  But because bonds have longer maturities and, depending on the type, credit risk, they fluctuate in value based on interest rate changes and changes in an issuers credit status.  Thus, bond returns and risk have been higher than cash investments.

Stocks have provided the highest returns over time but have the most risk because of the significantly higher but more volatile and less predictable cash flows available to owners.  We endeavor to determine the right mix of asset classes and build portfolios that are customized to client return objectives, risk tolerance and other constraints, such as time horizon, taxes, liquidity requirements, legal and regulatory issues, and unique circumstances.  All are defined in the client Investment Policy Statement.

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