#Risk has a bad name these days, probably with good reason

07/08/2017

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In my previous blogs titled "What I wish I knew at age 25: Understanding investment risk" and "How much money are you prepared  to lose" I said every investor, including me, has to know their own appetite for risk before they can even think about targeting the returns they’d like to get. Basically, how much money are you prepared to lose in the short term in order to reach your long-term goal?

Riskalyze will tell you how.

Once you’ve used Riskalyze to match your risk-return profile, you can then better navigate how to reach your goals. (Once you’ve done the survey, good advice is handy -- and we have a team of advisers on call, whether you’re in the  EasyEquities Emperor Asset Management bundles or in one of Emperor’s segregated managed portfolios or the unit trust.)

In the past, the investment industry has badly let down private investors, mainly because their risk-assessment tools are out of date. Riskalyze solves that big problem, giving you a much more realistic platform from which you can then set out to reach your goals.

It’s about honest dialogue between you and your advisor. Once Riskalyze tells you both how much risk you’re prepared to take, you can set out together to devise a properly balanced investment strategy. Since it’s a flexible tool, you will BOTH be accountable for the outcomes.

From my experience, nine out of ten investors don’t realise that their “risk number” is a lot higher than they realise. It’s no surprise, then, that their portfolios are positioned too conservatively for them. You can blame the old risk-assessment tools for that. Safety “buckets” are a problem.

Another thing I’ve noticed over the years is that financial advisors tend to put their clients into risk categories they themselves conform to! It’s kind of a default conservatism -- playing it safe because the advisor himself wants to play it safe.

Risk has a bad name these days, probably with good reason. The trouble is, most people don’t understand the basics: it’s not about the risk of losing ALL your money. That never happens. Rather, the level of risk you choose should be something you’re comfortable with. And the Riskalyze tool will show you that your perceptions and fears about “losing money” point exactly to the kind of assets you should be invested in.

The reason I like the Riskalyze tool is that it is proactive. It provides some context with regard to your investment journey. Right now, how do you feel about the market? If you answer honestly, Riskalyze will recommend a basket of assets that realistically matches your expectations.

Above all, since you can revisit Riskalyze at any time, it gives you a sense of context, of how you’re doing on your journey. It can stop you doing daft things like selling at the bottom, or taking undue risks to chase an unrealistic goal.

In conclusion, Riskalyze is the simplest way to customise your portfolio so that it is properly balanced according to your risk-return evaluation. If there are mismatches, Riskalyze will suggest how you should rebalance. It looks at your investments holistically -- not just your Emperor investments, but things like RAs and pensions and your other assets and liabilities.

Calculate your risk number 

Remember, Riskalyze will suggest how you should rebalance. It looks at your investments holistically -- not just your Emperor investments, but things like RAs and pensions and your other assets and liabilities so remember to include your holistic portfolio, not only your investments with Emperor.

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