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The main purpose of this blog is to help demystify and expand upon financial concepts that may be confusing for some people. There is such a variety of potential topics, so please feel free to e-mail us with your financial concerns!

The Volatility Drag

 Monday, May 20, 2019

Diversification, defensive factor positioning, and managed volatility strategies are all portfolio construction techniques that are often introduced to help control volatility. While risk reduction is a good reason to implement these approaches, it is important to realize that the risk management benefits can actually translate into higher returns. To appreciate this, it is necessary to understand the concept of ‘volatility drag’.