STRATEGIES TO MANAGE INVESTMENT RISK

• All investors hate losing money and even the thought of losing money.  However, too often:
• We chase yields without regard to risk, or
• stock pick, or
• try and time markets, or
• put our money in the bank

The ultimate result for many is that the investor runs out of money!

Yet the results could be so different if we adopt investment processes which include good risk strategies.

HERE ARE THE STRATEGIES WE USE AT RED IN OUR INVESTMENT PROCESS TO MANAGE RISK:

1. Start with an Investment Policy Statement (IPS) – your roadmap to successful investing which spells out your goals, timeframes, asset allocation strategy, expected returns, risk tolerances and liquidity requirements.
   This document takes the emotion (both greed and fear) out of the investment process;  hence it stops us making irrational or spur of the moment decisions.
2. Diversify, Diversify, Diversify as between asset classes and individual securities.  We typically:
   • (a) use up to 12 structured asset classes
   • (b) invest in over 20,000 companies/securities
3. Investors hence have a minimal chance of losing money; yet they earn full market returns . 
4. Invest globally.  This is a vital ingredient when we look at getting a balance between investors’ assets and liabilities and the nature of their expenditures.  Also Australia and New Zealand in aggregate provide exposure to only 3% of the invest able universe.  Why not share in at least part of the other 97%?
5. Employ specialist investment managers with:
   • low costs
   • no style drift
   • tax efficiencies
6. Benchmark investment managers’ performance against a recognised and relevant index and track overall portfolio performance against your IPS goals.
7. Rebalance between the structured asset classes regularly. In effect we are selling high & buying low .

How does the above line up with your strategies for managing risk?  If you scored higher than two you are well above the median!!