The recent political and economic instability reminds us that while there are some “black swan” risks that are out of an investor’s control, portfolios can and should be managed based on an investor’s risk tolerance. See Paul Sullivan’s recent New York Times article entitled “Managing an Investment Portfolio for Risks, Not Only Returns.”
In the ominous economic and investment environment we have today with the uncertainty that has unsettled all equity markets, the recent market selloff, fears of a double-dip recession, the vast levels of U.S. and other sovereign debt extending into the future as far as the eye can see, the historic downgrade of U.S. government debt, and the fears that a recession could get even worse under austerity plans it has been said that now is a time to think less about return on investment and more about return of investment.
While one cannot control the environment, one may, at least to some extent, control one’s exposure to it. Now is the time for investors and their advisors to review risk profiles, cash requirements, and investment goals, and make sure that they are appropriate for the current environment. While some volatility is to be expected in investing, and at least some experts say investors should avoid taking extreme positions, such as highly concentrated portfolios, with the complex events unfolding in today’s markets, many investors and their advisors may wish to consider taking a more conservative stance.
Investor attorney J. Boyd Page, the senior partner of Atlanta-based Page Perry, observed: “What’s worse than not making money on your investments? Losing your money on them. Investors and their advisors are sometimes too preoccupied with returns and fail to devote proper attention to risks. Given the recent volatility, every investment is dangerous, and it is particularly important to avoid taking excessive and uncompensated risks. Investors should remember that advisors have an obligation to inform investors of the risks associated with investments the advisor recommends.”
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions.