High Returns From Low Risk

A Remarkable Stock Market Paradox

The Book

For generations investors have believed that risk and return are inseparable. But is this really true? In High Returns from Low Risk, Pim van Vliet, founder and fund manager of multi-billion Conservative Equity funds at Robeco and expert in the field of low-risk investing, combines the latest research with stock market data going back to 1929 to prove that investing in low-risk stocks gives surprisingly high returns, significantly better than those generated by high-risk stocks. Together with investment specialist Jan de Koning, he presents this counterintuitive story as a modern upbeat stock market equivalent of ‘the tortoise and the hare’.

 

This book helps you to construct your own low-risk portfolio, select the right ETF or to find an active low-risk fund in order to profit from this paradox. And it explains why investing in low-risk stocks works and will continue to work, even once more people become aware of the paradox. It’s also a personal story, one that links our human nature and behavior to a prudent and successful investment formula. High Returns from Low Risk gives all the tools one needs to achieve excellent, long-term investment results. The book is available in English and German and will be published in French, Spanish and simplified Chinese as well.


Praise for the book

"The low-risk effect, that is the idea that historically, unlike many well-known theories, average return across stocks doesn't appear to go up with most standard measures of risk, is one of the most important 'anomalies' in modern finance. Pim van Vliet is one of the pioneers in studying this effect and using it to improve investor portfolios. Anyone interested in systematic equity investing should carefully read this important book."

Clifford S. Asness, Founder, Managing Principal and Chief Investment Officer at AQR Capital Management, USA

 

“Pim van Vliet has been a pioneer in turning academic insights on the low risk equity anomaly into a multi-billion investment portfolio. This book presents his magnum opus in a clear and powerful way, shedding light on low risk investing for anyone interested in equity investing, regardless of their quantitative background. It’s definitely a worthy read.”

Gerben de Zwart, Head of Quantitative Equities, APG Asset Management, The Netherlands

 

"I loved reading the book. It’s educational, humble, funny and philosophical; quite rare attributes for a financial book. In today's world  where individuals will have to take more and more responsibility for their savings, this book serves a need: providing sound and pragmatic advice about how to manage one’s savings. Furthermore, this book puts forward an inconvenient truth about investment that is close to my heart: more risk doesn’t necessarily mean more return. On the contrary, it is sound and pro-active risk management that permits investment portfolios to have sustainable long-term returns"

Fiona Frick, CEO Unigestion, Switzerland

 

"Pim van Vliet’s experience as one of pioneers of low volatility investing gives him unique insight into one of the most fascinating economic anomalies of our time.  The idea that risk, properly defined, generates a positive return, is one of those ideas that becomes even more profound when we learn it is not true. There is no cosmic risk karma that pays people for taking risk, and this book will help people understand what types of investment risks generate premiums, and which actually will cost you money."

Eric Falkenstein, Author of ‘The Missing Risk Premium’: Why Low Volatility Investing works, USA

 

“Explaining a financial theory to a broad audience is no easy task, and refuting one of the oldest and best known investment theories: higher risk for higher returns, harder still. But Pim (and Jan) manage to convince the reader in this easy to read and accessible book of their approach. They not only explain low-risk investing, but offer readers a whole set of investment (and even life) lessons at the same time. I would recommend every investor read this book. It may not turn all readers into low-risk investors, but it certainly will offer valuable insights into the risk/return question.”

Ronald van Genderen, CFA, Manager Research Analyst at Morningstar, The Netherlands

 

The Illustrations

 

Sometimes a picture is worth a thousand words. In order to explain the remarkable stock market paradox of low risk stocks beating high risk stocks in the best possible way, the book contains a lot of beautiful illustrations and graphs created by graphs illustrator Ron Offermans.

 

The Authors

Pim van Vliet, PhD is the founder and fund manager of the multi-billion Conservative Equity funds at Robeco. These low-risk funds are based on academic research and provide investors with a stable source of income from the stock market. He is a guest lecturer at several universities, the author of numerous financial publications and he travels the world advocating low-volatility investing. Pim holds a PhD and an MSc (cum laude) in Financial Economics from Erasmus University Rotterdam.

 

Jan de Koning, CFA, CAIA, CMT is a client portfolio manager for Robeco’s quantitative equities strategies and conducts client and consultant meetings, speaks at conferences and gives seminars on low-volatility investing. In the past, he published regular investment updates and was an investment advisor, portfolio manager and fiduciary manager for institutional investors. Jan holds a MSc from Tilburg University and is a CFA®, CAIA and CMT charter holder.

 

The Dataset

Exclusively for readers of the book we offer the complete dataset covering the period 1929 - 2016. The dataset is protected by a password. The password can be found in the book in the Epilogue (Jan's Perspective) and equals the last word of the second sentence of this chapter.

April 2017: Dataset has been updated and includes returns for 2015 & 2016.

 

Download
High Returns From Low Risk - Dataset 1929 - 2016
Updated dataset including returns for 2015 & 2016
High Returns from Low Risk - Dataset 192
Microsoft Excel Table 2.2 MB

The Screeners

Your Review

Have you read the book? If your answer is 'Yes', we hope you liked it and are able and willing to practically implement this prudent investment philosophy. We're grateful you have taken the time to 'listen' to the story of this remarkable investment paradox. We're interested to receive your feedback as it may inspire other investors as well to become a tortoise-like investor! Please submit your review on the website of Amazon (for eBook/Kindle, click here), Barnes & Noble, !ndigo or Bol.com (in Dutch). If you would like to share private feedback, please feel free to do so by our contact form.  

Conservative Formula available at ValueSignals.com

As of today investors can screen for stocks that offer high returns from low risk by using the screener of ValueSignals.com.


Charles Sizemore reviews the book

"Van Vliet and de Koning found that, over the past 86 years, a portfolio of the least volatile stocks (lowest decile) outperformed a portfolio of the most volatile stocks (highest decile) with annualized returns of 10.2% and 6.4%, respectively.

 

Van Vliet and de Koning are anomaly hunters, and I would include them among the growing evidence-based “smart beta” movement that seek to build a better mousetrap than traditional cap-weighting indexing."


Book review in the Financial Times - FTAdvisor

"I am always keen to consider and understand new investment strategies. Exposure to a wide range of views and opinions is an important factor in allowing me to continue to deliver robust financial advice.

 

I am therefore pleased to have taken time to read High Returns from Low Risk. Heavy with paradox, I think overall the text is aimed at the do-it-yourself investor who is comfortable and confident to make longer term investment choices with the aim of re-investing income/returns to achieve effective/rewarding compounding – indicated as the eighth wonder of the world."


Stockopedia.com: book review and recommendation

"One of Europe’s most influential fund managers has just written a fabulous little book titled “High Returns from Low Risk - a remarkable stock market paradox”. I don’t recommend many books, but I think there are a lot of investors that could learn from this. It’s barely 140 pages long, and in spite of a dose of marketing towards the end, it’s a great addition to any stock market investor’s library.

 

The book is written by academic turned fund manager Pim Van Vliet and his colleague Jan de Koning. Both work at the Dutch fund management group Robeco, which has become well known for its factor investing funds. While Van Vliet will take the plaudits for the book, it’s clear that De Koning has had a huge hand in making his ideas accessible and should take a lot of credit. It’s no mean feat to make tricky financial concepts easily understandable, and I think they’ve nailed it.


Review by Larry Swedroe on ETF.com

"Larry Swedroe, a principal and the director of research for Buckingham Strategic Wealth as well as an independent member of the BAM Alliance and author of the book "Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests Today" has wrote a review on the well-known website ETF.com.

 

Larry: "Van Vliet and de Koning’s simple algorithm-based methodology is similar to the simple algorithm approach, or “magic formula,” presented by Joel Greenblatt in his book “The Little Book That Beats the Market.” (..) Both demonstrate that simple algorithms (which provide systematic approaches to gaining exposure to well-documented factors) have been able to outperform the vast majority of professional investors using their discretion. It’s the “machine is superior to man” story, the explanation being that man is subject to many biases that are difficult to overcome.

Summarizing the book, Van Vliet and de Koning conclude that the fact that low-risk stocks beat high-risk stocks is an inconvenient truth—inconvenient because it demonstrates that standard asset pricing models are wrong. For those interested in low-risk investing, reading “High Returns from Low Risk: A Remarkable Stock Market Paradox” is well worth the time.


Book review Poland: Wysokie ryzyko daje niskie zyski

"Nie ma prostej liniowej zależności między ryzykiem a zyskiem na rynkach akcji. Najbardziej ryzykowne akcje są najmniej zyskowne – piszą Pim Van Vliet i Jen De Koning we właśnie wydanej książce „High Returns form Low Risk. A Remarkable Stock Market Paradox”. Wysokie ryzyko – wysokie zyski, niskie ryzyko – niskie zyski to zasada, która wydaje się być tak oczywista jak to, że ziemia jest okrągła. Jednak autorzy książki (jej polski tytuł to „Wysokie zyski z niskiego ryzyka. Niesamowity paradoks giełdy”) postanowili ją sprawdzić. Wzięli do analizy dane z amerykańskiej giełdy od stycznia 1926 r. do grudnia 2014 r. "


Australian review: 5 things I learned from “High Returns from Low Risk”

“High Returns from Low Risk” by Pim van Vliet is the most approachable book on the low volatility stock anomaly. Most investors will tell you that risk and return are two linked parts of investment – a willingness to take more risk delivers higher returns.

 

But is this always the case? Pim van Vliet doesn’t think so, and has built a large and successful funds management business out of his belief that assets that are lower risk deliver higher rewards than investment theory says they should. The book teaches you how to build low volatility equity portfolios that not only beat the market, but do so at lower levels . Here are five things that I learnt from this excellent book: .


Article in Dutch newspaper de Volkskrant: Paradox als exportproduct

"Het is de grote beleggingsparadox die Nederland nu als exportproduct koestert. Speculatieve groeiaandelen zoals Google en Snapchat leveren op lange of korte termijn niet meer rendement op dan behoudende defensieve waarden zoals Unilever en Ahold Delhaize. Hiermee wordt de oude in de VS zo gekoesterde beleggingswijsheid (‘hoe hoger het risico hoe hoger het rendement’) op zijn kop gezet. Risico loont niet, risico wordt afgestraft. Robeco timmert daarmee nu internationaal aan de weg."

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News paper article (in Dutch)
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Book review by Dutch Magazine Financial Investigator

"Een van de zogenoemde beleggingswijsheden is dat risico en rendement met elkaar samenhangen: hoe hoger het risico, hoe hoger het mogelijke rendement. In ‘High Returns from Low Risk’ laat Pim van Vliet, Fund Manager van het Conservative Equity Fund bij Robeco, echter zien dat investeren in aandelen met een laag risico over een langere periode aanzienlijk meer oplevert dan beleggen in high-risk aandelen. De vraag die zich natuurlijk onmiddellijk voordoet is: waarom wordt er dan niet veel meer belegd in low-risk aandelen? Een van de charmes van het boek van Van Vliet, waarvan Jan de Koning, eveneens beleggingsspecialist bij Robeco, co-auteur is, is dat dit soort vragen niet uit de weg worden gegaan. Wat blijkt?"

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Money Life India: A Breakthrough Book

"For the patient do-it-yourself investor, High Returns from Low Risk by Pim Van Vliet is a breakthrough book, in the same league as The Little Book that Beats the Market. In that book, Joel Greenblatt explained how ranking stocks on the basis of high return on capital and low valuation does the job of picking long-term winners. This book, too, offers a quantitative formula. Van Vliet demonstrates that ranking stocks on three filters—low volatility, high dividend yield and rising momentum —yields terrific market-beating results. He shares the excellent back-tested results of this formula"


Bokrecension from Sweden: High Returns from Low Risk

Som något av ett mål för året har jag köpt hem en del ekonomi- och finansböcker. Helt enkelt i syfte att lära mig mer om olika teorier och strategier samt försöka bli än mer kritisk och påläst i mitt beslutsfattande. Den första boken jag läste var Rich Dad Poor Dad som var mer inspirerande och motiverande till att försöka få in ett mer ekonomiskt och drivande tankesätt i vardagen varpå man göder sin egen framgång. Bild High Returns from Low Risk är skriven av en fondförvaltare vid namn Pim Van Vliet, holländare, som grundat och förvaltat fonden Constitutional Equity Fond för Robeco. Boken vill redogöra för vad den kallar för "Investeringsparadoxen". Paradoxen innebär förenklat att devisen "hög risk innebär hög avkastning" inte stämmer. Hög risk tenderar att leda till medioker avkastning medan låg risk och framförallt låg volatilitet leder till exemplarisk avkastning över tid. Således är paradoxen att det är låg risk som ger hög avkastning och tvärtom. Alltså fundamentalt emot vad som predikas i flera läromedel gällande investeringar.


Updated dataset: Low Risk stocks continue to beat High Risk stocks

Our book, High Returns from Low Risk: a remarkable stock market paradox, has been available for sale since the beginning of January 2017. We are very satisfied that the book grabbed the attention of investors from all over the world as we’ve highlighted in previous blog-posts. After the summer we expect some more momentum by introducing the book in other languages as well.

 

In the English and German book we demonstrate the powerful and remarkable results of investing 100 USD in a portfolio consisting so-called ‘Conservative stocks’ and the results of investing a similar amount of money in a portfolio consisting high-risk stocks, the so-called Risky portfolio. Both portfolios started on the 1st of January 1929 and the book demonstrates the evolution of both portfolios until the first of January 2015. The different graphs, illustrations and tables shown in the book provide a clear message: low-risk beats high-risk when investing in equities.

 

During 2015 and 2016 we have kept ourselves busy by writing and publishing the book. In the book we promised our readers to inform them once we’ve updated the dataset. As of today readers of the book are able to download and access the updated dataset covering the period January 1929 – January 2017 (password protected, the password can be found in the book in Chapter 15 and equals the third word in the first sentence of this chapter). This updated dataset includes the monthly returns of the ten volatility-sorted portfolios for the years 2015 and 2016. As can be seen in the graph Conservative stocks continue to beat Risky stocks over the last two years.


Book review by ValueWalk.com

"Pim van Vliet and Jan de Koning, both members of Robeco’s quantitative equities team (with van Vliet responsible primarily for the firm’s conservative equity strategies), have written a book challenging the claim that risk and return are positively correlated. High Returns from Low Risk: A Remarkable Stock Market Paradox (Wiley, 2017) is intended for a broad audience of investors. As a result, even though the authors obviously have quant skills, there’s no razzle-dazzle math on display here"


Column in Intercontinental Finance & Law

"For generations investors have believed that risk and return are inseparable. Emperical-evidence proves them wrong. The good news: investors can profit from this paradox".

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The inconvenient truth of a remarkable stock market paradox
Column by Pim van Vliet
IFLPiece.pdf
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Risikoarme Aktien erzielen langfristig höhere Erträge

"Für viele Investoren gilt nach wie vor der Glaubensgrundsatz, dass sich eine höhere Rendite ausschlieBlich über ein gröBeres eingegangenes Risiko erzielen lässt. Diese vermeintlich positive Beziehung zwischen Rendite und Risiko ist eine zentrale Erkenntnis in gängigen Kapitalmarktmodellen wie dem CAPM (Capital Asset Pricing Model)."

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Risikoarme Aktien erzielen langfristig höhere Erträge (PDF)
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Factor Investing for the Masses - 3i-Invest.com

"Take a look at the business section next time you’re in a bookshop and the chances are the smiling, bespectacled face of Warren Buffett will be looking at you from multiple book covers, advocating the merits of value investing. It is not quite the same with low-volatility strategies.

Although low-volatility investment strategies have steadily gained popularity among institutional investors worldwide in recent years, there are no ukulele-playing sages who have made this form of investing a key topic in the popular investment genre.

Pim van Vliet, Managing Director of Conservative Equities at Robeco, thought it was time to change this and has published a book that explains the history, methodology and application of the low-volatility anomaly in simple terms."


German book review by German finance blog

Im Gegensatz zu seinem deutschen Kollegen ist Pim van Vliet jedoch – was als Feststellung und nicht als Wertung zu versetehen ist – mit einer gehörigen Portion trockenen Humors ausgestattet, die augenzwinkernd sein jüngst im FinanzBuch Verlag aufgelegtes Buch „High Returns from Low Risk“ (*) durchzieht. Die Kernthese des für die Fondsgesellschaft Robeco tätigen Portfoliomanagers lautet: Etwas mehr Risiko erhöht die Rendite, zu viel davon verringert sie jedoch wieder – dieser Befund ist langfristig stabil, gilt weltweit und über alle Anlageklassen. Vor allem aber widerspricht er dem klassischen Lehrbuchdogma der Wertpapieranlage, demnach höhere Renditen immer mit höherem Risiko einhergehen und umgekehrt. Wie kommt van Vliet nun zu diesem von ihm selbst so bezeichneten „Anlageparadox“?

 

Nach dem Fußballfeld ist mit „High Returns from Low Risk: Der Weg zum eigenen stabilen Aktien-Portfolio“ (*) nunmehr auch auf dem Börsenparkett der Klassiker Deutschland gegen die Niederlande eröffnet.


Is a free lunch on the menu? - InvestmentEurope Magazine

"There is a general saying that there is no such thing as a free lunch, but High Returns from Low Risk sets out to prove that low volatility stocks can outperform high risk ones over time. Jonathan Boyd has reviewed the 'paradox'.

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Is a free lunch on the menu for the low risk investor (PDF)
Book review by Jonathan Boyd.
InvestmentEurope.pdf
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High Returns from Low Risk als Sparplan - DeutschesConto

"Mit geringerem Risiko als üblich ein größeres Vermögen aufbauen, so übersetze ich den Titel des Buches eines niederländischen Fondsmanagers und Statistik-Strategen.

 

Die deutschsprachige Ausgabe erschien vor wenigen Wochen im Finanzbuchverlag und sie ist es wirklich wert, aufmerksam gelesen zu werden (ein Exemplar können Sie geschenkt bekommen – mehr dazu am Ende des Artikels). "


Book review in the Financial Times - China edition

"1月20日特朗普就职美国总统以来发布的一系列充满争议性的行政命令举世哗然,但有两点值得一提。一是,虽然此前多数人认为特朗普不太可能实施他在竞选时毁誉参半的主张,我在《华尔街对特朗普由恨转爱用了多久?》一文却指出,研究发现,欧美政客当选后会兑现竞选纲领中的大部分主张。在美国,二战结束以来历届总统平均67%的竞选主张得到实施,在欧洲,这个守信比例更高。二是,特朗普创下了1896年以来美国总统从当选到就职阶段中道琼斯指数上涨幅度第二和回撤最低的记录(图1),尽管民调显示特朗普在交接期的民众满意度48%是近20年来最低,但对于股票市场的投资者来说,这场权力交接过渡之顺畅可喜可贺。"


Interview mit Pim van Vliet - DenkFabrik.Rocks

"Denken Sie einfach an die folgende »Anlegerweisheit«: Je mehr Risiko Sie eingehen, desto höher werden Ihre Renditen sein. Die meisten Aktienanleger, ob professionelle Vermögensverwalter wie Anlageberater und Hedgefonds-Manager oder »do it yourself«-Privatanleger, glauben an dieses Konzept von mehr Risiko, mehr Rendite. Aber stimmt es wirklich?"


German book review by Covacoro

Heute möchte ich das Buch "High returns from low risk" vorstellen, das vor kurzem im FinanzBuch Verlag erschienen ist. Die Autoren sind Pim van Vliet und Jan de Koning.

 

"Aber, worauf es ankommt: Das Buch ist wertvoll und lesenswert. Nicht vordergründig wegen der Konzepte für die Aktienanlage, die es beschreibt, sondern vor allem, weil diese Konzepte und Einstellungen im privaten und beruflichen Leben genauso gültig sind, wie am Aktienmarkt."


Bucktipp - FondsProfessionell.de

"Im aktuellen Buchtipp des FONDS professionell KLUBS erläutern die Investment-Experten Pim van Vliet und Jan de Koning, warum risikoarme Aktien langfristig eine signifikant höhere Rendite erzielen als risikoreiche Aktien"


Top 5 position for the book at AbnormalReturns.com

The Top 10 (by Unit Sales):

 

1.Influence: The Science of Persuasion by Robert Cialdini

2.A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market by Ed Thorp

3.The Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Living a Good Life by Mark Manson

4.Pacific: Silicon Chips and Surfboards Coral Reefs and Atom Bombs Brutal Dictators Fading Empires and the Coming Collision of the World’s Superpowers by Simon Winchester

5.High Returns from Low Risk: A Remarkable Stock Market Paradox by Pim van Vliet and Jan de Koning


Book review in German by Dr. Oliver Everling

"Das neue Buch aus dem FinanzBuch Verlag mit dem Titel „high returns from low risk“ ist seine persönliche Geschichte, die eine Reihe von persönlichen Anekdoten enthält: nämlich die Geschichte von Pim van Vliet. Pim van Vliet ist Gründer und Portfolio-Manager milliardenschwerer Fonds von Robeco. Er ist zugleich Gastdozent an verschiedenen Universitäten und Verfasser einer Vielzahl finanzwissenschaftlicher Publikationen. Um diese Geschichte zu Papier zu bringen, als ihm Jan de Koning, der als Client-Portfolio-Manager bei Robeco tätig ist. Er leitet Kunden- und Berater-Gespräche, spricht auf Konferenzen und gibt Seminare zu Themen wie die systematische Auswahl von risikoarmen Aktien."


German TradersJournal publishes a review of the book

"Eine höhere Rendite geht immer mit einem höheren Risiko einher!« Für Generationen von Anlegern gilt das als einer der Glaubenssätze des Investierens. Aber hält dieses Dogma auch einer tief gehenden Überprüfung stand? Pim van Vliet und Jan de Koning beweisen in »High Returns from Low Risk« das Gegenteil. Die beiden Investment-Spezialisten haben akribisch historische Marktdaten ab 1929 analysiert, anhand derer sie belegen können: Die Anlage in risikoarme Aktien bringt nicht nur überraschend hohe, sondern sogar signifikant höhere Renditen als die Investition in hochriskante Papiere."


German book review by FondsDiscount

Investmentlogik auf den Kopf gestellt: Hohe Gewinne trotz niedriger Risiken?

 

"Die Finanzmärkte sind wie eine moderne Version der Fabel vom Hasen und der Schildkröte. Aktien mit weniger Risiko bringen langfristig die höheren Gewinne, sagt Robeco Fondsgründer Pim van Vliet in seinem neuen Buch High Returns from Low Risk."


New blog post on the website of LSE

The success of evidence-based strategies demonstrates that low-risk investment yields superior returns, writes Pim van Vliet.

 

"My wife is a surgeon, and her field of medicine has been transformed by the ‘evidence-based’ approach. Every pill she prescribes is extensively tested and empirically validated. You will agree that this makes sense, since it directly affects our physical health."


Blog by Eric Falkenstein on the Book

"Pim van Vliet runs one of the oldest and most successful Low Volatility funds in the world, which has now flowered into Robeco’s Conservative Equities brand of funds. It is noteworthy that it is not referred to as “low volatility,” because when he began this strategy in 2006, low volatility was not a ‘thing.’ High Returns from Low Risk is targeted at airport readers and casual investors, and is a quick read—36k words—that makes a profound point: objectively, high volatility stocks are bad investments."


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