5. More on How to Increase Your Expected Returns

Ancona Financial is among a select group of advisors chosen to work with some of the industry's most respected financial economists, including Nobel Laureates.

Their academic research has defined three sources of risk that account for over 90% of expected returns.

1. MARKET:
   
   • Equities (Stocks) vs. Fixed Income (Bonds, CD's, Treasuries)
     
   • Stocks, as a class, are more risky than Fixed Income, and therefore must offer a higher expected return.
     
   • The fixed income investor has less risk by accepts a lower expected return.
     
2. SIZE:
   
   • Small companies, as a class, are riskier than Large Companies
     
   • Because risk and returns are related:
     Tilt portfolio toward smaller companies for higher expected returns/ risk
     Tilt portfolio toward large companies for less risk/ lower expected returns
     
3. STYLE:
   
   • A company's Ratio of Book Value to Market Value is a risk factor.
     High "BtM" is a sign of distress in the company, manifested as a lowered market value
     High BtM ('Value") investments must offer a higher expected return to attract investors
     Low BtM ("Growth") "healthy" companies pay less for capital, and thus lower investor returns.
     
   • So, the commonly held belief that we should invest in "growth" companies to maximize returns is false. (Remember the Tech stock bubble?)

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