Risk Management Is a term used in finance. Basically, it is the practice of identifying future or potential risks in advance, analyzing them and then taking the necessary steps to try to minimize or reduce the risk.
A well-balanced portfolio should be designed with a variety of assets, including (but not limited to) equities, fixed income, real estate, traditional assets and, perhaps, even non-traditional assets.
Fixed income (bonds) is designed to protect the portfolio in the event of a downturn in the market. It may not eliminate the risk, but should help minimize it. Equities are considered to be riskier than bonds, but designed to provide higher returns. Generally, investments that are less risky will also provide smaller returns.
When determining the potential upside or downside to any risk you should:
- Identify the potential risk.
- Analyze both the pros and the cons.
- Evaluate how the various outcomes could change in the future.
- Decide on a course of action.
- Continue to monitor the risk as events change (in either your finances or personal world).
This report is for information purposes only and is not a recommendation for any particular security. Mention of individual securities should not imply that we own the security or have owned it in the past. In addition, the information provided here should not form the basis for investment decisions. Past performance is no guarantee of future results. This information should not be used in any transaction without the advice and guidance of your Tax Professional. LifeSteps Financial has not independently verified, or attested to the accuracy or authenticity of the information, including any investment performance measurement.