Risk is something we all face, investors and advisors. At it's base level, risk goes to our daily activities. What should guide us through our investment decisions is "how much of my investment am I willing to lose?"
The past few years have been great for the equity markets across the world, bringing the conservative approach of investing to the front line, with large established companies providing double digits returns. Yet, we all look for something better, don't you love to feel the butterflies? It is the human nature and there's a word for it, it is greed. Greed drives us to want more, it motivates us to work harder, and...to have a riskier portfolio.
China, India, and Brazil to name a few of the riskiesr countries. Of course they all sound great when you put 50% return next to them, but what about the downside? There's a certain risl level attached to a certain level of return, and these two have a positive relationship. Also keep in mind high volatility when it comes to developing countries. Now, what percentage of your portfolio would you put to in high risk? Let me share my practice with you. Being a conservative investor, I get to an agreement with each of my clients to allocate a small percantage of the portfolio as speculative.
Whether you invest by yourself or use professional service, have a business mind set when it comes to investing. It is your money we're talking about! Whether you are a conservative or a risky investor (or anything between), you need to set the optimal asset mix that suits your profile. In other words, you need to have a stratigic plan.
So you got the plan, what next? Follow it religeously. Sure it takes discipline, but it will be a second nature if you regarded investment as one aspect of your business.
Good luck!
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