Any time you invest money, you should be expecting some kind of return. The cost of this return is the risk that you’re taking: many investors would suggest that the greater the risk you take, the higher the return you should be rewarded. It is also true that when you have a chance for a high return due to high risk, you also have a greater chance of losing money - that’s why it’s called risk. Investing is an age-old concept and there has been a lot said about applying wisdom to this process.
Ecclesiastes 11:2 says to “give a portion to seven even to eight, because you do not know what disaster may happen on the earth.”
So, diversification is the first risk-mitigating strategy that investors should consider implementing into their portfolios, with the first step taking place at the security level. When you understand the risks inherent in an individual investment, you can better determine its role in a portfolio and then the strategies needed to mitigate those risks. Combining a variety of good quality investments that contain different levels of risk will help to ensure that if something goes wrong in the world, all of your savings are not put into jeopardy at the same time.
This is also where the professional portfolio manager comes in. At Capstone Private Wealth, it’s our job to evaluate investment opportunities in all areas – not just the stock market. We have the tools and experience to specifically identify the risks and the value of an investment's potential return. From there, we can determine the role it will play in the portfolio and then find ways to mitigate some of the risks that may apply to it.
Maria Dawes, Portfolio Manager
Capstone Private Wealth