Only Take Risks Worth Taking
It’s a truism of investing: there’s a trade-off between the risk you take and the reward you might receive. The safer the investment, the lower the probable return, and vice versa.
Some investors, understandably wanting to make the most money, take a lot of risks. Maybe a small percentage of them end up with outsized gains. But what’s more likely is that very risky investing ends up with large losses. When this happens, just earning back the lost money can be a challenge.
Here at Assante, our aim is to help you meet your long-term goals. It might be maintaining your current lifestyle. It might be avoiding a big ‘Financial Mistake’ that would impair your wealth. Or perhaps you simply seek the peace of mind of knowing that you and your family have a comfortable nest egg, and that the next generation will be well taken care of.
Whatever your goals, we work with you to create a portfolio that meets them.
And depending on your goals and your risk tolerance, your portfolio will have more or less risk associated with it. For example, if you’re 30 years old, you can afford to take more risk, so odds are that equities make up a good deal of your investments. If you’re 70 and nearing retirement, however, you probably are more interested in preserving what you already have. In this case, chances are that fixed income plays a bigger role in your overall holdings.
There are two important things to remember here:
- Your portfolio is designed for you: We don`t offer a one-size fits all portfolio, because you are a unique client. Your needs and goals will be different than someone else.
- We think long-term. When we sit down with you and create your investment policy statement, we do so after hearing from you about where you are financially and where you`d like to be years from now. While we do adjust our investment strategies as appropriate, we never take our eye off the bigger picture.
You Don`t Need to Take More Risk Than Necessary
In a perfect world, investors could earn large returns while taking zero risks. Sadly, that’s not how the world works. To earn decent returns, you do have to take some risks. The key here, however, is to only take as much risk as is necessary to meet your goals. Beyond that, you will only be taking the risk that those goals won’t be met.
We Seek Solid Returns with Low Volatility
Imagine there are two investors. One puts all their money in a single stock, and it goes up 7% in a year. The other investor owns 50 stocks plus an array of bonds. This investor also earns 7% in the same year.
Are they equally successful? No.
The trick with investing is achieving good returns with the lowest volatility possible. In the case of the second investor, he or she is doing that in spades. It’s a balanced, diversified portfolio and the end result is a healthy gain.
The second investor? Not so much. In all probability, the volatility of the one stock this investor bought far exceeded that of the more conservative person. While it did end up on the year, it also could have easily plummeted, wreaking havoc in the process.
When we help you formulate your investment strategy, our goal is to help you achieve your goals without unneeded risks. That’s why we are constantly stress-testing your portfolio to make sure its volatility stays within an acceptable band.
Long story short, every portfolio will have some risk. But it’s important to only take those risks that are really worth taking.
I would like to wish you and your family a happy holiday and a healthy and successful 2021.
Assante Capital Management Ltd.
Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances.