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CORRELATION
- RISK should be non-correlated to other investments.
- RETURN correlation is of no consequence.
RISK & RETURN
- RISK is present whenever there is opportunity for RETURN.
- Historic RETURN does NOT guarantee future RETURN.
- Increased RISK does not necessarily equate to increased RETURN.
- Investments involve both foreseeable and unforeseeable RISKS.
- Unforeseeable RISKS (“acts of God”) are
very difficult to control.
- Thus it is often wise to both DIVERSIFY and HEDGE investments.
DIVERSIFICATION
- Reduces over-concentration and disperses RISK.
- Broadens OPPORTUNITIES for profit.
HEDGING
- Is wise but does not alleviate all risk.
- Foreseeable risk can usually be REDUCED
by intelligent “hedging.”
- All hedge protection costs money and thus may diminish return.
- The alternative is excessive risk.
- TIF Fund Management actively seeks traders who hedge.
LEVERAGE
- LEVERAGE may increase return, but
- Leverage ALWAYS increases risk.
- Strict controls must be maintained to protect assets.
- TIFFM does not employ leverage other than exchange margin.
DISCIPLINE
- DISCIPLINE is mandatory to implement controls.
VOLATILITY
- VOLATILITY is a double edged sword.
- It can either benefit or impede long-term return.
- LOW VOLATILITY usually reduces both return and risk.
- The combination of Leverage and Volatility can be a DANGEROUS.
RETURN CONSISTENCY
- CONTROL of losses can enhance return consistency.
- Return consistency is important to LONG-TERM PROFITABILITY.
- Consistent returns usually generate higher long-term returns than
volatile returns.
PRUDENCE, PATIENCE & RATIONALITY
- Prudence is vital to rational investing.
- Prudent Prior Planning Prevents P-Poor Performance.
- Patience is equally as valuable as being decisive.
DUE DILIGENCE
- Due Diligence is vitally important and very
prudent.
THE OBJECTIVE
- To increase return consistency and decrease portfolio volatility.
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