Abstract
Compound returns, not average returns or performance relative to a benchmark, should be the major focus of investment management. They are enhanced most by mitigation of tail losses and participation in tail gains, each time period. This is risk management. Option market prices provide valuable information about the risk of each period’s gains and losses. Tail risk management is of far greater importance for institutional and individual investors than is outperformance of a benchmark or static asset allocation frameworks to enhance compound returns. Conventional asset-allocation glide paths for individual savers from their working into retirement years fail to account properly for the effects of risk on future consumption programs.