New Investment Risk White Paper (best thing I’ve written in years)

                To download the 49-page Investment Risk vs. Investment Return white paper, please click on the following link:

My first version of this white paper came out in the fall of 2013. Since then, literally thousands of advisors have signed up to download the paper making it my #1 download of all time.

Since I put out my first version of the paper, the industry has changed dramatically. In 2013, there were no DOL fiduciary regulations. There really were not any software programs trying to help advisors quantify the risk tolerance of their clients or their investments.

In short, understanding investment risk is more important now than it’s ever been.

It is impossible to help pick “suitable” investments and properly allocate the right amount of money to FIAs and IULs unless you fully understand investment risk and can have an intelligent conversation with clients about it.

Since 2013, I’ve learned a lot more about investment risk and I’ve incorporated that knowledge into my updated white paper. I can easily say that this white paper is the best thing I’ve written in years.

What are the highlights of the updated 2017 version of my white paper?

Monte Carlo (MC)-I personally do not like how MC is used in our industry and I’m certain that most advisors don’t really understand it. The MC section of this white paper alone is worth reading.

VaR (Value at Risk)-VaR has been called the “new science of risk management” and yet very few advisors know what it is.

CALMAR-most advisors are not overly familiar with CALMAR if they know it at all. Understanding CALMAR will help advisors of all kinds help pick the most “suitable” investments/products for clients.

Stress Testing-Stress testing has become a very popular tool in some software programs. It can be a useful tool, but advisors need to understand how it works and its limitations.

Risk Tolerance and Risk Capacity-while most advisors think they understand risk tolerance, most do not. Also most advisors do not understand the vital interplay risk capacity plays in helping pick suitable investments/products. I do a nice job in the paper explaining both, and how they are intertwined.

Other topics covered in the paper

                Correlation, Beta, Rate of Return vs. Compound Annual Growth Rate (CAGR), Standard Deviation (and why it’s one of my least favorite risk metrics), Downside Deviation, Sortino Ratio, Sharpe Ratio, R-Square, Defining Maximum “Drawdown”, Tactical vs. Passive Investments, Absolute vs. Relative Return, Active vs. Passive Investing, Modern Portfolio Theory, Buy and Hold, Indexing, Funds of Funds, and Tactical Money Management.

This white paper gives the maximum drawdown statistics of the S&P 500 and compares them to other types of investments (including the tactical money management platform offered by the RIA I recommend (

If you think “asset allocation” works in today’s investing environment or if you are a Modern Portfolio Theory cool-aid drinker, you are definitely going to want to read this white paper.

Who should read this white paper?

-Anyone who has a securities license (7, 63, 65, etc.)

-Any life-only licensed advisor thinking of getting a securities license.

-Life-only licensed advisors, even if they don’t want to get a securities license.

-Anyone recommending mutual funds or index funds to their clients.

-Anyone recommending buy and hold strategies.

In my humble opinion, if you are giving advice to clients about their money, this is a must read.

Roccy DeFrancesco, JD
Strategic Marketing Partners