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Valuable Portfolios Are Rarely Analyzed for Risk

Valuable Portfolios Are Rarely Analyzed for Risk

The most successful investors approach the market in different ways, but they have this in common: they never lose a lot of money. That simple fact is not part of the narrative that surrounds markets and investing.

Individual investors, in comparison, usually ignore downside risks. They tend to see the financial markets as some sort of field of dreams where investments age gracefully and double in value every seven to 10 years. So many of these investors are so focused on making money and making a lot of it, that they often have unrealistic expectations, and this blinds them to the risks that they must take to achieve any return. It is a curious phenomenon, and one of the reasons why so few people are so ill-prepared for retirement.

Investment portfolios are increasingly the most valuable asset anyone owns, and yet they are almost always fully exposed to whatever it is that may bully markets. Meanwhile, those same people never underestimate the risks to their cars, homes, and even smartphones. Yet, investment portfolios that are infinitely more valuable are rarely, if ever, analyzed for risk. Are you, as an advisor, analyzing these critical areas of risk for your clients?

  • Tail Event Risk
  • Diversification Risk
  • Volatility Risk
  • Concentrated Stock Risk

The disconnect would make for a fascinating topic for behavioral finance experts, and invariably it will one day form a study. Until then, we can assert that part of the disconnect is animated by a lack of awareness around portfolio risk, and a near-total absence of education to help clients manage their emotions and behavior to achieve their long-term goals.

Our PRISM™ risk analysis software uses a blend of risk tolerance questionnaires, historical market events, and current market signals to provide advisors with all the data they need to know their customers and plan accordingly. Contact us to find out how StratiFi can help your practice and clients monitor risk across all investment holdings regardless of market conditions.

Akhil Lodha Author
Co-founder & CEO StratiFi Technologies

Building the industry standard for understanding portfolio risk through cutting- edge technology at Stratifi.

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