Risk Management

Our primary approach to risk management is "knowing what you own" making it easier to anticipate how the asset price may fluctuate in any economic or political environment. 

Key Challenges to Safeguarding Wealth

Political Risk

This risk stems from government policies, regulations, or geopolitical events impacting investments, like elections or trade disputes. Mitigate by investing strategically around political issues and avoiding overexposure through diversified portfolios across regions.

Economic Risk

Economic shifts, such as recessions or macroeconomic changes, can reduce asset values and returns, with volatility causing sudden market swings. Monitor trends and use hedging to buffer against these fluctuations.

Currency Risk

Fluctuations in exchange rates can erode the value of foreign investments. Hedge with tools like forwards or options, and diversify into stable currencies to minimize exposure.

Fraud Risk

Deceptive practices or scams, including cyber threats, can lead to significant losses. Implement strong policies, processes, record-keeping, and cyber security insurance for protection.

Errors and Omissions Risk

Errors or poor decisions by managers or advisors can result in suboptimal outcomes. Use errors and omissions (E&O) insurance, diversification, and third-party reviews for oversight.

Market Risk

Broad market declines from crashes or sector downturns affect all investments. Diversify across asset classes like stocks and bonds to reduce overall impact.

Taxation Risk

Changes in tax laws or poor planning can diminish net returns. Work with accounting professionals to optimize strategies and use tax-advantaged accounts.

Interest Rate Risk

Shifts in interest rates can cause bond and fixed-income values to fluctuate, with rises leading to price drops. Diversify into floating-rate securities or use hedges like futures.

Liquidity Risk

Inability to quickly sell assets without price impacts affects illiquid holdings like real estate. Keep part of the portfolio in liquid assets and avoid over-concentration in hard-to-sell items.

Credit Risk

Borrowers or issuers defaulting on obligations can cause losses on bonds or loans. Check credit ratings, diversify issuers, and consider credit default swaps.

Inflation Risk

Rising prices erode real investment returns, especially for cash or low-yield bonds. Invest in inflation-protected securities like TIPS, Equities, Real Estate, or Commodities. 

Operational & Cyber Security Risk

Losses from failed processes, systems, or external events like IT breakdowns. Strengthen with internal controls, audits, tech upgrades, and insurance.

Risk Tolerance Test

The Rutgers Investment Risk Tolerance Questionnaire (also known as the Rutgers risk quiz) is a widely used and empirically tested tool for assessing an individual's tolerance for investment risk. Developed by financial planning professors Dr. Ruth Lytton (Virginia Tech) and Dr. John Grable (University of Georgia), this quiz has been offered to the public for many years and is still hosted by the University of Missouri website after Rutgers transferred the online version to them.