How We Classify Risk at Palm Beach Research Group

Super Safe

We find the integrity of these assets almost completely unassailable. That’s where you’ll find the bulk of our assets, almost all of the time. We don’t believe the lie that risk equals reward. The truth is actually the exact opposite: investors who do the best job of avoiding losses usually end up with the best results.

Safe

Safe investments have some kind of formal structure or guarantee that protects you from loss. Not all safe investments work out. For example, muni bonds carry a promise of repayment from the municipal issuer. But muni bonds can suffer losses.

This is one of our most important intellectual advantages: by focusing almost exclusively on safe opportunities, we can sort the ones that are truly safe (you should buy these when their prices are attractive) and the ones that aren’t as safe as they appear. (You should always avoid these.)

Market

These assets are subject to the normal volatility of asset markets. A large, blue-chip corporation… or a well-financed real estate deal could carry a ‘market’ risk rating. You can lose money with this investment—but not very much. The maximum loss here will be your stop loss. We normally use a 25% stop loss. Using a variety of strategies, our goal is to reduce the risk on almost every investment we make to below market risk.

Speculative

You may lose all of your money−almost overnight−in these investments. There are times (very, very rarely) when we might take a risk in this category−but only with the money we are willing to lose.