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- Title
Volatility and Targeted Portfolio Returns.
- Authors
Jones, Travis L.; Fraser, Steve P.; Finch, J. Howard
- Abstract
Financial planners face a consistent challenge to help clients understand the trade-off between risk and return. Most clients relate to the idea of a targeted level of expected return to achieve specific wealth goals but with limited understanding of the required risk. Extended investment horizons require client discipline when market volatility appears to be enhancing the possibility of loss of wealth. The purpose of this article is to illustrate that bearing the risk associated with market volatility can reward clients with the achievement of targeted portfolio returns, even during times of great financial and economic uncertainty. Data from 1994 to 2013 is used to create hypothetical portfolios consisting of stock and bond allocations designed to target specific client return objectives. Graphical charts illustrate the resulting annual volatility associated with multiyear investment horizons. Financial planners can use these examples to better communicate the historical volatility associated with portfolios constructed to deliver target levels of return to clients.
- Publication
Journal of Financial Counseling & Planning, 2016, Vol 27, Issue 1, p122
- ISSN
1052-3073
- Publication type
Academic Journal
- DOI
10.1891/1052-3073.27.1.122