In the world of institutionalized money management, much attention has been paid to the idea of managing risk. Investors have been conditioned to believe that mutual funds and other products can mitigate risk and deliver “predictable” returns that parallel popular historical indexes.
There’s a fundamental flaw in this logic: Risk is not a number. It’s a concept, and it can’t be effectively “managed” without limiting the potential in an investment portfolio.
Rather than reacting to the perception of risk, the real focus of investing should be understanding market volatility and accounting for it in decision-making. In contrast, modern portfolio theory seeks to minimize risk through over-diversification is not prudent risk management. It looks backward at volatility and manages assets to an acceptable benchmark. And too often, the results are unimpressive.
At Chevy Chase Trust, planning for volatility means we have to think differently and make better decisions. We’re curious in our study of the global economy, creative in the way we identify opportunities, diligent in our research, and intentional in our allocations. We focus on the things we understand—and look beyond conventional wisdom. As thoughtful and active managers of every client’s allocation, we pay attention to every transaction.
In short, Chevy Chase Trust has a different attitude about risk—and we take a different approach from most money managers. We apply all of our knowledge, experience and creativity to one client portfolio at a time.
