tag:blogger.com,1999:blog-775967109474059335.post6903487543651283933..comments2023-11-13T00:52:34.306-08:00Comments on Kevin On Investing: Time, Inflation, and UncertaintyUnknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-775967109474059335.post-20351866126342153642010-04-27T00:51:45.356-07:002010-04-27T00:51:45.356-07:00Portfolio theory suggests combining risky assets w...Portfolio theory suggests combining risky assets with risk free assets, based on your risk tolerance. So, if you have zero risk tolerance, you would invest only in risk-free assets. Most advisors recommend using a combination of risky and risk-free assets, or at least using low risk assets (like high quality short-term bond funds) to reduce the risk of your portfolio to a level that's appropriate for you.<br /><br />The examples in the post actually demonstrate how one might use past returns to estimate the uncertainty of future returns. You look at the variation (standard deviation) of past returns, and assume that the variation of future returns will be similar. So, stocks have had more variation of returns than bonds in the past, so most people assume stocks will have higher variation of returns in the future (i.e., that they will continue to be riskier than bonds).<br /><br />This actually is what usually is done, although it's good to keep in mind that the future may be different than the past.Kevinhttps://www.blogger.com/profile/03576910288369216955noreply@blogger.comtag:blogger.com,1999:blog-775967109474059335.post-29336063023806665292010-04-26T22:54:58.420-07:002010-04-26T22:54:58.420-07:00Very well written article... When investing, is it...Very well written article... When investing, is it common to go all or nothing? For example, let's say someone was more comfortable with risk-free returns. Do people generally make all these types of investments, or is it typical to invest in some investments with risk-free returns while also investing in others with more risk? <br />Furthermore, I'm curious how one might analyze past returns to look at the uncertainty of future returns. This may be the more technical, in-depth stuff you are trying to avoid, but I'm curious if it's understandable by someone like me...hmmm, there's a challenge for you!!Marisahttps://www.blogger.com/profile/15908613265523053304noreply@blogger.com