• How We Work For You
  1. Our Process
• Our Investment Philosophy
  1. Markets Work
  2. Dimensions of Risk
  3. Diversification
  4. Structure
• Succession Planning
  1. Changing Lanes 2011 Issue 1
  2. Changing Lanes 2009 Issue 3
  3. Changing Lanes 2009 Issue 2
  4. Changing Lanes 2008 Issue 1
• Model Portfolios
  1. JSGE Portfolios 2011
  2. JSGE Portfolios 2010
• The Informed Investor
  1. Rethink the Way You Invest
  2. Achieving All That Is Important
  3. Rising Above the Noise
  4. Five Key Concepts
  5. Concept 2
  6. Concept 3
  7. Concept 4
  8. Concept 5
  9. Your Next Steps
• Building Value
  1. Building Value - Part 1
  2. Building Value - Part 2
  3. Building Value - Part 3
• Diesel Hedging
  1. Diesel Hedging
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• Upcoming Events
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  1. Estate Freeze Article in Aggregate and Roadbuilding Magazine
  2. Why Succession Planning Article
  3. Diesel Hedging in Aggregate and Roadbuilding Magazine
  4. Roadbuilder Magazine article
  5. Weston Wellington's Comment
  6. Flight To Quality
• About Us
  1. The Team
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Dimensions of Risk

Evidence from practising investors and academics alike points to an undeniable conclusion: Returns come from risk. Gain is rarely accomplished without taking a chance, but not all risks carry a reliable reward. Financial science over the last fifty years has brought us to a powerful understanding of the risks that are worth taking and the risks that are not.

Three Equity Factors

Market Stocks have higher expected returns than fixed income.

Size Small company stocks have higher expected returns than large company stocks.

Price Lower-priced "value" stocks have higher expected returns than higher-priced "growth" stocks.

Everything we have learned about expected returns in the equity markets can be summarized in three dimensions. The first is that stocks are riskier than bonds and have greater expected returns. Relative performance among stocks is largely driven by the two other dimensions: small/large and value/growth. Many economists believe small cap and value stocks outperform because the market rationally discounts their prices to reflect underlying risk. The lower prices give investors greater upside as compensation for bearing this risk.

Size and Value Matter

In US dollars. Developed markets value and growth index data provided by Fama/French. The S&P data are provided by Standard & Poor's Index Services Group. US Small Cap Index is the CRSP 6-10 Index. CRSP data provided by the Center for Research in Security Prices, University of Chicago. International Small Cap index data: 1970-June 1981, 50% UK small cap stocks provided by the London Business School and 50% Japan small cap stocks provided by Nomura Securities; July 1981-present: simulated by Dimensional from StyleResearch securities data; includes securities of MSCI EAFE Index countries, market-capitalization weighted, each country capped at 50%. MSCI data copyright MSCI 2005, all rights reserved.

Two Fixed Income Factors

Maturity Longer-term instruments are riskier than shorter-term instruments.

Default Instruments of lower credit quality are riskier than instruments of higher credit quality.

The Jim Sanderson Group approaches fixed income primarily as a strategy to maximize overall portfolio benefit. Shorter-term, high-quality debt instruments tend to have less risk. We use lower-risk bond strategies so investors can temper their total portfolio volatility or take more risk in equities, where expected returns are greater.