Monitor Financial Crisis

How do you monitor the progression of a financial crisis?

Our Real-time Risk Monitor helps you visualize what exactly is going on. Like 3D X-ray, its pure factual diagnostics give you crystal clear insights that you don’t get elsewhere.

On 2018/09/15, Lehman Brothers filed for bankruptcy. It was the largest bankruptcy in history and a pivotal point during the 2008 financial crisis.

What would it look like using our Real-time Risk Monitor?

On the risk-return chart below, the mini pie charts on the dotted line indicate the actual risks and returns (annualized) of a set of model portfolios for the 1-month period ending 2008/09/15, as compared to the 30-year averages on the solid line. You can see that across the board, the actual risk is much higher than the 30-year averages, and the return is well into the negatives for most of models.

For the most aggressive model (the rightmost one), the annualized return was -67% for the 1-month period ending 2008/09/15, and the risk was significantly higher than the 30-year average.

This is the risk-return chart for the 3-month period ending 2008/09/15.

It is clear that the 1-month was a lot worse than the 3-month.

When a blizzard is on the way, it is only wise to take shelter. Some advisors advise their clients to stay put – after all, if we wait long enough, the sun will come out. Trust erodes.

Taking shelter, in this case, would not only make common sense, but also make perfect sense under risk management principles. The whole idea of risk management is to find the asset allocation that delivers the best return within the client’s risk tolerance level. If higher risk doesn’t bring higher return, why take it?

Keep in mind that when you protect your clients’ assets, you are also protecting your own revenue.

Let’s see what Real-Time Risk Monitor tells us two months later: everything shifts much further to the lower right and the risk goes through the roof.

When the market starts to recover in 2009, you can see it too. Try it here at any time. No need to create an account.

Read this to learn how to reduce panic during zig-zags.

Sign up for 6-month FREE! You will be able to see your own models and client portfolios on this chart.

Monitor Financial Crisis

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