Rixtrema’s Predictive Guesswork Hasn’t Held Up Either
When their crash test modeled oil dropping 50%, they projected that three different funds would therefore be down between 22% and 38% (Source: Rixtrema's predictions of portfolio behavior in response to changes in oil prices are outlined in Mike McDaniel's 2019 Fearless Investing Summit keynote.)
Soon after, it just so happens that we got to see the scenario play out in real life. Oil actually did drop 50%, and all three funds went up.
If you had been lucky enough to guess the price of oil correctly, the Predictive Guesswork Model would’ve gotten it completely wrong—all because of bad methodology.
Now imagine having to correctly guess on 10 different factors.
Which Leads Us To The Critical Question: Do You Want Your Risk Solution To Create Fear, Or Fight It?
2HiddenLevers "Fighting the Kung Flu" Webinar, January 30, 2020
The approach championed by HiddenLevers and RiXtrema—modeling doomsday scenarios based on guesswork about how they will impact market levers—does nothing but incite fear in your clients. It’s like a neon red “SELL” sign flashing in their faces. It completely undermines your message as an advisor, and exacerbates a client’s natural tendency to make fear-driven decisions that can blow up their financial futures.
Riskalyze was founded on the belief that you solve the behavior problem, and fight fear, by helping clients see what is normal behavior for their portfolio using the 95% Historical Range, and educate them about 5% downside events using historical stress tests. When you do that effectively, you empower that client to make fearless investing decisions that lead to great long-term financial outcomes.
3HiddenLevers "Recession Immunity" Webinar, February 26, 2020
4Actual results of the S&P 500 index for 2020