Over the last hundred years, small capitalization stocks have outperformed portfolios of large capitalization stocks, with greater volatility. The least volatile, and lowest performing investment, is the shortest term debt issued by a sovereign nation. These points build the capital market line of risk and return. Performance above the line is difficult to obtain, but is obviously the goal of every investor.

Risk can be measured through many different means, from volatility (the degree of the change of value over time), to potential maximum draw down, to the possibility of absolute failure. NLP Investments views risk as the likelihood of essential capital not being available for its intended purpose when it is required. We believe the most accurate way to measure this risk is through volatility. With a given volatility, the more time an investor has, there will be less risk. Given a fixed amount of time, the only way to reduce an investor's risk is through lower volatility.