Yield Management Inc
KEEP CALM AND INVEST ON
The world is an uncertain place. We live in turbulent times. And we still have to manage our
investments. Calmly.
The investment professionals at Yield Management Inc. have a
diverse professional background and over a century of cumulative
experience. As a team, they have seen it
all, and their wealth of skill, knowledge and understanding is what sets them
apart caring for their high net worth clients.
Risk management is one of the most important aspects of
managing money. Working with a
professional investment advisor is the best action you can take to protect and
grow your assets. Most investment risks can be mitigated without expensive
hedging techniques. Let’s look at a few
aspects of risk management and how the professionals at Yield Management can
help.
DIVERSIFICATION
The first rule of risk management is diversification. You should be invested across a broad range
of asset classes, markets, sectors and countries. Investing internationally is of growing
importance, since it simultaneously reduces currency, geopolitical and market
risk. People tend to react to the term “foreign
investment” as implying greater risk, but it means nothing more than unfamiliar
or distant. The Hang Seng is exotic to
the Wall Street investor, the NASDAQ is exotique
to the French investor and the CAC might even sound rude to some.
The flip side of the diversification coin is the risk of
OVERDIVERSIFICATION. The marginal
benefit of owning more than 12 individual equity holdings starts to drop
sharply. In fact, excessive
overdiversification will generate average returns at best, and incur additional
fees, commissions and management expenses that will eat in to your returns. This is why most mutual funds under-perform
the market. Working with a trusted
investment advisor to hand-select a portfolio of well chosen, diversified
stocks is the first step to managing your risk.
SAFE HAVENS
Under the mattress is not a safe haven. Neither is under a
petticoat. There are four traditional safe havens: Gold, the U.S. Dollar, the Swiss Franc and
the Japanese Yen.
When there is uncertainty or instability or any kind of
chaos – real or perceived - assets flow to safe havens. Including a gold stock and having at least
part of your portfolio in U.S. Dollar denominated investments are two examples
of how you can automatically position yourself into the two most important safe
havens. Talk to your Yield Management
Advisor about safe-haven assets appropriate for you and your investment
objectives.
RISKS OF STAYING IN CASH
It can be very tempting for a nervous investor to stay in
cash. Don’t.
With interest rates so low, when you factor in inflation,
you are actually losing money. Certain
economically strong countries are even experiencing negative interest rates,
meaning it costs you money to hold cash.
Switzerland, Sweden and Japan have all experienced this phenomenon
recently with Germany about to follow suit.
Even with positive interest rates, holding cash exposes you
to INFLATION RISK. Inflation causes your
purchasing power to decline. This means
that year over year, you can buy less with what you have. The whole point of investing is to protect
what you have and make it grow.
The best protection against inflation risk is to invest in
the market. While the past is no
guarantee of the future, a long term, diversified stock portfolio provides the
best returns. Since 1950 the S&P 500
returned 7% annually, adjusted for inflation and dividends.
MARKET DOWNTURNS AND HAND-HOLDING
Markets correct, markets crash and at times they suffer
slow, grinding downturns known as bear markets.
These always pass. The important
thing is to stay calm, and never sell into panic driven or volatile
markets. This is one of the most
important reasons to work with a seasoned professional, like the advisors at
Yield Management. They have seen it all,
and most importantly, they are objective.
One of the most vital aspects of their job is not in fact investment
selection, but keeping a cool head and guiding you through the inevitable ups
and downs in the market.
THE NEXT STEP
Talk to one of the professionals at Yield Management to find
out how they can help you to minimize risk and make your money grow. They can be reached at:
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