Many people today are striving to be good stewards of the wealth that they’ve been entrusted with, but too often I see them trying to accomplish this by simply chasing the highest returns. Don’t be deceived, ignoring the risks associated with high rates of return is not good stewardship. Proverbs 27:12 says, “The prudent see danger and take refuge, but the naive keep going and pay the penalty.”
How should good stewards exercise prudence when evaluating an investment? First, never be afraid to ask lots of questions. You need to understand what your hard-earned money is actually being invested in. You also need to know when an investment is offering a high return, more often than not the risk profile will also be high. Do not be naive to this principle and assume your investment is “the exception.”
And finally, please know that risk is not always defined as stock market volatility. It can also be the lack of liquidity, which is common in real estate, or interest rate changes, which is common in the fixed income market. There are many kinds of risks and as a good steward, it is your job to investigate what risks your portfolio is subject to and then determine if you can afford to take them.
Maria Dawes, Portfolio Manager
Capstone Private Wealth