Weekly Wire – Noise keeps you up at night, active risk management helps you sleep better.
We’ve all been kept up on occasion by the neighbor throwing a party a little too late or the sirens on an emergency vehicle passing by, or even the dog digging in the trash you just put out. It’s all noise of various kinds. Sometimes it’s tough to filter out what is annoying noise (like the dog getting in the trash) and a more serious type of noise (like the siren). If you lay awake in bed, you end up worrying, imagining what that horrible sound might be – often imagining the worst. However, there is a simple solution – get out of bed and look to see what caused the noise.
There is plenty of investment related noise in the media caused by various market news, economic indicators and world events. A lot of this noise has the ability to keep investors up at night. A few recent examples include Greece’s debt crisis, China’s stock market crash and Puerto Rico’s ability to service their municipal bonds. You may not be able to put your mind at ease by getting up to look out your window…but there is a simple solution.
Investors may sleep better when employing a strategy that includes active risk management based on unbiased data. The worry associated with the media noise has no bearing on changes in the portfolio using this type of strategy; rather, the annoying noise can be filtered out because unbiased data shows what is happening, rather than what might happen. Investors who use active risk management in their investment strategy are often less worried because they know whether the noise in the media has resulted in a market condition that actually warrants some action.
Check out Investopedia’s definition of risk management here.
Active risk management is at the core of the strategy we use for our clients. If you are not a client and would like to talk to us about how we may be able to help employ an active risk management strategy for your portfolio click here for a complimentary consultation.