I guess there's no need to write the whole article to say that proper money management and position sizing is essential for trading any asset class. The suggested methodology is not disclosed and therefore it's impossible to judge whether it could support the idea in the article title or not.

Each class of individuals do reflect diverse risk appetite that progressively changes with age.

Hence, riskiness of various asset class discussion is extremely subjective. Anyone would prefer to get back a better return than their particular economy`s real interest rate plus a margin. Eg in US or Japan as of now the interest rates are artificially controlled to abnormal levels (effectively nil) but in a country like India, where interest rates are running in double digits, expectations of investors are certainly much higher than that of US or Japan. So, no investor can set a generalised global standard of return and risk as they too are subject to the each economies unique financial expectations stemming from their typical financial architecture.

What we are doing is getting to the bottom of that risk subjectivity: By asking the right questions, we can ascertain an investors risk appetite and then use that information to create the right portfolio for that investor, using the asset picks that either a third party 'expert' or the investor him/her-self makes. All assets are available to be chosen, and a portfolio is created from those that are chosen and then sized correctly.

Agree with @Alex that what you state is obvious. The trick is to dynamically change the allocations based on 'echo-gnomy'.

Also you have to define what is high risk. I may define high-risk as a 500:1 leveraged Forex trading account, a conservative investor may define having a portfolio of mid-cap US stocks as high-risk.

interesting comments, thanks for taking the time.

I think we are on different tracks here:

I am expressly separating the asset choice from the sizing choice:

i.e.so you want to trade USDJPY FX.. that's an asset choice, now how much should you trade? that's a size choice.. if you say 500:1 leveraged FX , you are confusing the two.. you are including sizing and asset choice in one discussion.

If you tell me what assets you want to hold (or short), and SEPARATELY we quantify what risk tolerance you have, then I can tell you want size you should have in each of these assets. And I can tell you that you can have ANY asset..that's your choice, but not in any size if you want to remain consistent with the risk tolerance that we have already quantified.

That's the essence of this post: Any Asset for Any Investor.. But not in Any Size!

Traditional Asst Management says 'restrict the assets available to investors based on their Risk Tolerance"

I am turning that on its head.

There is no asset class that consistently generates double digit returns in the long term. So no asset allocation philosophy can make it happen. Risk usually manages to find the most risk averse. Especially, risk of the unrewarding kind. Conservative investors would go for strategies like buying index ETFs and holding (and may be selling in panic when the hit the rock bottom) or buying gold and holding. In they process they accept risk that doesn't offer proportional return. Index etfs for instance have a sharpe of less than 1, in the buy and hold model. I'm not saying Sharpe is a great measure of risk reward. But these so called conservative strategies fail on other measures of risk reward as well.

With regards to U.S. investors, have you considered the impact of Regulation D? In other words, I suspect an investor's risk tolerance may not be the only issue which jeopardizes your vision of "Any Asset for Any Investor" but also the SEC's requirement that certain

investments can only be purchased by "accredited investors".

A good trading strategy produces an equity curve that has almost nothing to do with the equity curve of the asset class itself. It pretty much masks the asset class. For an active manager / trader, having a portfolio of strategies is more important than having a portfolio of asset classes. For a passive manager, asset classes matter, as the passive manager is trying to maximize her own leisure time :)

@Richard. This is a well written and effective marketing piece.

Hi Richard: It's an interesting article but I'm pretty sure that what you state not necessarily true. If someone states a true risk tolerance ( e.g, say maximum portfolio variance ) and they are looking to maximize return, ( and we can assume just for simplicity's sake, that we could estimate expected returns and covariances and variances perfectly. even thought that's an absurd assumption ), there will be places on the efficient frontier where some risky assets will not be held. These are places where including them would therefore make the resulting portfolio inefficient with respect to whatever benchmark you're using. So, no, I don't think what you say is necessarily true but I might be not understanding something in the article. An example of what you state would be helpful. Thanks.

@Oscar, thanks vm!

@Bharath, I mostly agree.. the difficulty is in creating a good trading strategy.. and when Managers are differently motivated to Investors, what the Manager considers good is not what the Investor requires.. that's where our maths and ORS system comes in.

@Mark: Good Q's, I can clarify: Risk tolerance is not just variance,you need your Investors' full utility curve, and maximising return is not a realistic goal in isolation from other risk considerations. If you have 'skill' , i.e. some expectation that the Manager is better than the market, then any asset that is not 100% correlated to another asset will be in the portfolio. This is why ORS is not an academic approach, but is a real world further development of portfolio theory that we use to manage portfolios.

Hi Richard: Thanks for clarification. My understanding now is that you don't look at portfolio construction from a mean variance tradeoff perspective but some other way that allows for all assets to be included. Definitely sounds interesting but still somewhat vague as far as the mathematics behind how you calculate "risk". Unless that is known in detail, it's hard for me to see how what you say is true. But I appreciate the clarification. Thanks again.

Mark