Industry Insights and News Blog

Don’t Fear Risk—Use It: 3 Investors Share Their Best Risk Management Advice

 

The Reality of Investment Risks and Asset Allocations

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Risk is an investor's reality. While it's impossible to eliminate inherent risk, you can manage it. It's not an easy task, but with preparation, information and a well thought out strategy, you can better control your outcomes. We asked our Connex Partners Members, your peers in-the-trenches, for their best risk management advice as well as their top considerations before allocating.


nixon-katie-200x250-1.jpgKatherine Nixon, Executive Vice President and Chief Investment Officer - Wealth Management, Northern Trust

What is your best piece of advice for risk management?

The most important aspect of managing risk is knowing where risk is and the nature of the risk. To be aware of exactly what risks you are taking and determining whether they are risks that there is a high expectation/confidence around compensation, is critical. Further, peeling back the onion on decisions to determine what hidden risks may exist and whether you really have a risk management strategy in place is extremely important.

What are two things you consider before allocating?

A complete understanding of the drivers of both return and risk is a necessary consideration prior to any investment. Many times, new allocations are simply "versions" of existing allocations in different wrappers. Those are most likely not worthy investments.

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dlm.jpgDorena Moore, Chief Financial Officer at Heartspring Methodist Foundation

What is your best piece of advice for risk management?

Trust and Verify → Know why you take the risk level you do, and don’t be swayed by others to take on more than you know and understand.

What are two things you consider before allocating?

  1. Know the reason you need to allocate.
  2. Know the return you need to pursue/get.

These are your reasons to allocate. Sticks to your guns, and don't be persuaded to shift it it's not what your portfolio needs.

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dstacy.jpgDavid Stacy, Trustee, Midland Firemen's Relief & Retirement Fund

What is your best piece of advice for risk management?

  1. Understand what the risks actually are.
  2. Make sure the reward is commensurate with the risk.
  3. Don’t fear risk—use it.

What are two things you consider before allocating?

  1. Risk of allocation individually and complementary
  2. Return of allocation individually and complementary
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Does this advice line up with your experiences? Sound off in the comments or tweet us @ConnexInv.

Interested in networking with professionals like David, Katherine and Dorena? Join us in October at our Investments Sector Meeting. Download the agenda here for more information.

 

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