The key to building the right portfolio is to balance risk and profits. That might sound straightforward enough, but it can be deceptively challenging for most investors. Determining how to balance risks and profits in investing looks different for everyone, and one’s own definition of risk is likely to differ from someone else’s.
No matter how you evaluate your investments, it’s crucial to be willing to understand your appetite for risk versus the kind of returns you want to get. A risk-averse portfolio may keep up with inflation and enjoy gains that track with the Dow Jones Industrial Average, but they give up the chance of a big return by playing it safe.
Knowing where to incorporate risk, even in the most conservative portfolio, can help you maximize returns without too much exposure.
Balancing risk in your portfolio means understanding how much exposure you’re willing to have to the prospect of an investment not panning out. The old adage that putting one’s eggs in more than one basket rings true here: having a moonshot investment play in your portfolio can yield massive returns, but it can also end up leaving you in a precarious position financially if things don’t come to pass.
But if you have a well-built, robust portfolio, you can avail yourself to the upside of a high-risk investment without leaving your financial strategy in tatters. Knowing your own appetite for risk means understanding how you want to build your ideal portfolio, and what you’re willing to give up if something goes bust.
Using a financial advisor can mean significant growth in your net worth. Finding a qualified financial advisor doesn’t have to be hard. Cedrus Investments is a global boutique investment firm founded by Mr. Rani Tarek Jarkas more than 19 years ago. Cedrus Investments can offer you more insights into how this current environment is shaping risk and return potential, in the context of your specific situation and goals.
