Managing Risk While Pursuing Opportunities

Keith Wetjen |

When building a wealth management plan, our goal is to help individuals and families grow, manage, and protect their wealth in a way that aligns with their goals and values. A key component of the plan is a thoughtful and strategic investment strategy - one that seeks to maximize returns while reducing risk.

While the particular investment strategy we recommend may vary by client based on their specific goals and timeline, there are a few key considerations we recommend everyone take into account. Below please find our top tips to help you manage risk while pursuing opportunity within your wealth management plan:

Start with a plan

Oftentimes, the answer to the question “how do I maximize returns while minimizing risk” is it depends. The two things to consider, and that differ based on individual, are what your specific goals are and the timeframe in which you are looking to work toward those goals. These variables will ultimately affect your asset allocation and the diversification of your portfolio.

Generally speaking, the higher the risk associated with a particular investment, the greater for potential returns - and losses. Once you have a clear understanding of what you hope to achieve and by when, you can more effectively identify an approach to best serve your needs.

Be consistent

Once you have a plan in place, it is important to be consistent. It can be difficult to stay committed to the approach you’ve established when you hear about market developments and current events. However, staying focused on your personal goals and objectives and giving your plan time to work is key to success. Avoid the temptation to make changes when being influenced by outside factors, trends, or fads. And, when needed, reach out to your advisor for an objective opinion and support navigating new opportunities.

Note: It is important to mention that, just because you’ve created a long-term plan, you shouldn’t stick to it blindly. Life events happen, external factors may impact on your plan, or your goals may change. While plans should be long-term, they should also be assessed regularly to ensure they are still working towards your current objectives and are reflective of your current situation. When in doubt, reach out to your advisor for guidance on if and when it’s appropriate to adjust your plan.

Invest early and often

A key to maximizing opportunities with your wealth is to make it work for you. If your assets are in cash, they are depreciating in value each day. Instead, investing your assets can be an important way to grow your wealth.

The earlier you start investing, the greater opportunity for return you have and the more you can take advantage of compound interest on your investments. To start, identify “low-hanging fruit” or the investments you can expect to receive a return on - for example, your 401(k). Next, consider the diversification of your portfolio. It’s often helpful to focus on diversifying your portfolio from the start, potentially reducing the impact of any major market changes on your portfolio. This can serve as a strong foundation for future investments, especially if you are interested in exploring high-risk, high-reward investment opportunities in the future.

Get support

Working with a wealth management professional that can offer you objective guidance can be a great way to seek opportunity while minimizing risk. Oftentimes, building your wealth management strategy can bring about personal and professional considerations or issues you hadn’t previously considered. Working with an advisor can help you focus on your core goals and will help you navigate any questions and concerns that come up in a neutral manner.

Additionally, working with a wealth management advisor gives you access to strategies, resources, and industry partners you may not otherwise have access to. Not only may this offer you a less stressful and more enjoyable planning experience, but it provides you with additional support as you work towards growing and protecting your wealth.

Have questions on how to maximize opportunities while minimizing risk within your own plan? Reach out to your advisor or contact us at (860) 838-3730 to learn more.