Over the last several years, many investors discovered to their unfortunate surprise that their portfolios were not nearly as protected from downside risk as they thought and that their traditional idea of "diversification" fell short.
As part of our efforts to educate investors on what we call "The New Diversification," we recently spoke with Professor Christopher Geczy, Academic Director of the Wharton Wealth Management Initiative and an Adjunct Associate Professor of Finance at The Wharton School. Highlights from our conversation include:
- Modern Portfolio Theory did not fail during the credit crisis — portfolio construction did.
- Investors should consider incorporating a much wider range of strategies and assets as part of their core investment strategy.
- Alternative investing is misunderstood. Gaining access to investments that tend to behave differently is an approach that almost everyone should employ, and many alternative strategies are now available to a broad range of individuals.