Q: What makes good risk good?

A: Good risk pays for itself with opportunity.

Everyone talks about minimizing risk, but without risk investing looks a lot like a passbook savings account. Risk — the chance that returns will vary, both positively and negatively — is the price of admission for the opportunity to earn higher returns. For instance, small stocks (the dark blue dot) have earned higher returns than other asset classes, but are the most volatile as well. Investors who can tolerate the risk may be rewarded with higher returns.

Not all risk is desirable, however. Some risks foster volatility without increasing expected return. For instance, trying to time the market — jumping in and out based on charts, trends, or hunches — introduces the risk of missing big up days, but doesn't systematically increase expected return.

We suggest investors embrace the risks that offer opportunity, not just volatility.

Next time: Is now the time for market timing?

Contact: John Osbon 617.217.2772 josbon@osboncapital.com

Osbon Capital Management, LLC ("Osbon") is an SEC registered investment adviser with its principal place of business in the Commonwealth of Massachusetts. Osbon and its representatives are in compliance with the current notice filing requirements imposed upon registered investment advisers by those states in which Osbon maintains clients.

This Q&A contains general information that is not suitable for everyone and should not be construed as personalized investment advice. The historical returns presented herein are based on market indices and are for informational purposes only and do not reflect actual client accounts. The historical returns are not net of advisory and/or other fees and expenses. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this Q&A will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

For additional information about Osbon, including fees and services, send for our disclosure statement as set forth on Form ADV using the contact information herein. Please read the disclosure statement carefully before you invest or send money. For information pertaining to the registration status of Osbon, please contact Osbon or refer to the Investment Adviser Public Disclosure web site.