3 SEI Stability-Focused Strategies
We know that emotions often drive behavior and that
uncertain times can lead to fear-driven, impulsive
decisions. The Stability-Focused Strategies were designed
to take that emotion into account. Accordingly, they adhere
to predetermined risk budgets in an effort to minimize
declines in a portfolio's value (what portfolio managers
refer to as "drawdown") when markets are falling.
Winning by not losing
After experiencing a loss, it takes a greater gain to get back where you started. As shown below,
an 11% gain is needed to make up for a 10% loss, a 25% gain to recoup a 20% loss, and 100%
gain to make up for a 50% loss. This dynamic emphasizes the importance of winning by seeking to
minimize losses. If you can minimize your portfolio's losses in down markets, you have less ground
to cover in the subsequent recovery.
Recovery from loss
Loss
Gain required to
recoup loss
SEI STABILIT Y-FOCUSED STR ATEGIES
Built to help account
for human behavior.
For illustrative purposes only.
