I have been around long enough to see it all in our show business. Come on, it is a familiar story: when the stock market is on fire, some investors start acting like they are invincible, chasing returns as if risk does not exist. After all, who needs diversification when every stock seems to be going up, right?
It is like ditching your seatbelt because the road looks smooth, only to realize how important it is when the ride gets rough. With the S&P 500 up more than 20% so far this year and effectively at record highs, why worry about minimizing risk when you are watching the market soar?
Here is the catch – markets do not stay hot forever especially with the higher volatility that we have experienced over the last couple of years. When things cool down, those same investors suddenly remember why diversification matters, like remembering you left the oven on after leaving the house.
In case you were wondering, a correlation of zero is actually a good thing. An alternative investment fund with zero correlation is not trying to keep pace with the market benchmark, and that is exactly why it makes such a valuable addition to your stock market portfolio, especially those who prefer risk-adjusted returns rather than the stock market’s volatile performance.
I work with a number of managers who share a disciplined approach. Their portfolios are structured not just to capture gains during the good times, but to hold firm or even gain when volatility strikes.
Our TM-IM system helps monitor and analyze their strategies in real time, ensuring that I’m always aware of how they are managing risk and adapting to market shifts. This focus on long-term resilience, rather than short-term success, is key to navigating the unpredictability of modern markets. It is like having a favorite dessert, you love it, but you know you should not live on ice cream alone.