What is a Drawdown?
Your biggest risk in investing is a large portfolio drawdown because you lose your investment capital. Portfolio management is as much about controlling losses as it is making money.
...5 Portfolio Risk Management Strategies
You can’t control the direction or volatility of stock prices. We’re going to focus on 5 portfolio risk management strategies that you can control.
...Standard Deviation, Probability, and Risk When Making Investment Decisions
Standard deviation and probability are concepts that make us better risk managers because they cause us to consider lower probability outcomes when making investment decisions.
...Alpha and Beta: How Do They Relate to Investment Risk?
We answer the question: What is Alpha and Beta?. Then we look at how a value oriented investor can approach these two investment concepts and become a better investor.
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Investment Risk Management Plan
The biggest risk of investing is permanent loss of principal. This may seem intuitive, yet few investors understand this or employ a comprehensive investment risk management plan.
...Perceived Risk vs. Real Risk: A Key to Successful Value Investing
Value investing is about purchasing investment assets at prices that put the odds of above average returns heavily in your favor. Excepting an investment that is going to go bust, almost any investment can be profitable if purchased at a low enough price.
The key to successful value investing is buying assets when the perceived risk is greater than the real risk. It’s equally important to avoid assets when the perceived risk is less that the real risk.
...Types of Investment Risk
Understanding the types of investment risk allows an investor to manage risk and optimize outcomes. Let’s look at the different types of investment risk and how a portfolio manager can use the tools available to improve their probability of positive outcomes instead of negative outcomes.
...Systematic Risk, Unsystematic Risk, Probability, and Expected Value
There are many types of investing risk. I believe the ultimate risk is permanently losing your capital. In order to avoid the ultimate risk you need an investment risk management plan. Part of this plan is to understand systematic and unsystematic risk and the most effective approaches to mitigating these risks.
...TED Spread & LIBOR: What Every Investor Should Know
The TED Spread is the difference between the 3 month T-bill rate and the 3 month London Inter Bank Offered Rate (LIBOR). It is important because it is an indicator of perceived economic risk, monetary liquidity, and perceived credit risk of the global financial banking system.
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