Risk is a fact of life for all investors. This is true whether you invest purely in shorter-term, ultra-conservative government bonds or have exposure to more volatile asset classes such as emerging market or micro-cap stocks.

Understandably, the word “risk” evokes strong emotions for most investors, leading many to believe that risk is something to be avoided altogether. But the truth is that exposure to risk is inevitable for investors—and essential for generating long-term returns.

When it comes to managing risk, investors should focus on optimizing their risk exposure in light of their return expectations. Once investors have determined the level of return they need to achieve their goals, investors should look to generate those returns through an asset allocation strategy that minimizes risk.

The first step in thinking strategically about risk is understanding the essence of what investment risk is and the various forms of risk that investors face.

Our latest private wealth advisory report helps investors:

  • Identify the various forms of market risk and company-specific risk
  • Understand the role of diversifying across and within asset classes
  • Delineate between risk tolerance and risk capacity