The world I live in as an investment advisor is forever changing. My first exposure to mutual funds was in 1963. A salesman would show up at my office door, at least monthly, looking for me to invest $10 or $20 in a mutual fund he was promoting. At some point he persuaded me to open an account, and periodically, he would stop by and ask if I was ready to put in a little more.

The name of the fund was Keystone S-4, but can you imagine that happening today? There was never a question about fees, about whether I could get my money back. I might have asked but the answer might not have been truthful. There was probably a prospectus that I never read. A few years later I cashed in the account to pay my attorney for something. I have no idea how much it was or whether or not I had a profit; at the time, it was an exciting new thing to do.

Today, after reinventing myself several times over the past 50 years, and sensitive to the needs of my clients, I focus heavily on what we euphemistically call Risk Management. This can take many forms but the objective is to limit the risk of loss that someone is exposed to whenever they invest money. If you minimize the risk, the assumption is you will have a better outcome.

We ( the “advisors” ) have to be very careful about making promises we cannot keep ( or risk being fined and/or driven out of business by the regulators ). I’m sure you’ve been exposed to the phrase “past performance is no guarantee of future performance” or something to that effect. Hell, I don’t know what I’m having for dinner, much less what the markets are going to do next week, next month, or next year!

I do know, however, that past performance allows you to introduce a risk measurement tool that effectively lets you compare disparate investment results. What you get is a number that represents an investment return per unit of risk. It’s called the Sortino Ratio. ( I have no idea if someone named Sortino was involved.)

Essentially, if you have two comparable investment portfolios, and the average return of each over a given time period, you can measure their respective returns in terms of units of risk. The one with the higher number had the greater return per unit of risk.

And while there is no assurance that what happens tomorrow will be the same, it does allow you to maintain a running analysis. And in the hands of people who know what they are doing, that allows you to minimize your losses, and hopefully, increase your chances of making money with your investments.

Which, in the final analysis, is why you take any financial risk at all. In our society, having more money is better than having less money. So you want to take steps to increase your chances of having more money in the future.

My job is to help you take intelligent steps, to help you embrace and manage risk. Because without risk, there is a strong possibility you will have less, since the stuff we need like food and shelter and gas for our cars is going to cost more over time.

Call or email me and I’ll show you an example.

Tony Kendzior, CLU, ChFC