Last week we had our Investor Education Series and the topic was “How to Put Risk to Work for Your Portfolio.” The basic message is that some risks that you take in your portfolio do have an expected payoff; others do not reward you for taking on risk whatsoever. In this series of articles I will be discussing the different types of risk, and how they can be either mitigated, or eliminated in your portfolios.
For investors, there is perhaps no greater area of confusion and misunderstanding that with the concept of risk. Even the so-called investment professionals such as stock brokers and financial planners only have a superficial grasp of it. Much less, take the time to educate their clients. The depth of understanding what kinds of risk that we as investors can or should take, how it can be managed, or how it can work for you needs to be grasped in order to achieve a closer step to that financial peace of mind we always talk about. Our friend and mentor Mark Matson once said, “Knowledge is power and by having it you are well armed.”
There is a vast difference in knowing risk exists and truly understanding it at a gut level. Only by understanding the many forms of risk does it become clear how to put it to work for your portfolio. That is what we mean by putting risk to work for you in your portfolio. In the following weeks I will be posting articles that deal with specifics risks, and what we at Pathfinder do to minimize the volatility in our client’s portfolios.
Philip A. Guske