What Does it Mean to Actively Manage Risk?
Often overlooked within financial advising is the power of active risk management. Actively managing risk is often interpreted to mean assessing risk tolerance and designing a portfolio that meets this profile. Often hedging, or including uncorrelated assets that protect from downside, is overlooked.
In the absence of this, investment management can become very expensive because you are essentially paying for market beta, not that much different than what you could get from passively tracking the market. The mathematical power of not having a drawdown can be very significant in the long term, as it puts you in the position to capture upside on a base that hasn’t fallen.
Portfolio Stress Testing + Risk Management
We use a rigorous risk management process to demonstrate what happens to a portfolio when certain economic events change, i.e. oil prices, home prices, or interest rates. Our method is robust, incorporating active derivatives to hedge your portfolio to reduce correlation, or connectedness, to the market at times when markets drop. This investment management process is combined with cash flow and financial planning that is reviewed periodically and made accessible to clients through easy to use technology.
Take Risk Assessment
The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market. – George Soros