Investment management is a critical aspect of managing risk in Australia, as it can help you mitigate financial risks and ensure your capital is working for you. Here are three ways investment management helps you mitigate risk.
1. Investment Management Helps Mitigate Risk Through Diversification
Diversification is one of the most effective ways to mitigate risk because it allows investors to put their money into many different assets at once, thereby reducing their exposure to any individual asset class or market. For example, if you invest all your money into just one company's stock and that company goes bankrupt, then all of your money will be gone. However, if you diversify across multiple companies, then even if one company goes bankrupt, the rest may still be profitable and thus your overall portfolio value won't take as big a hit as it would have otherwise taken had you not diversified.
2. Investment Management Helps Mitigate Risk By Investing In Different Asset Classes
Another way that investment management mitigates risk is by spreading out an investor's portfolio across different asset classes such as stocks, bonds and cash deposits. While each investment has its own level of risk, by diversifying across all three asset classes, an investor can reduce the overall amount of risk that they are exposed to. For example, if you invest all of your money in just stocks it is possible that one bad day could wipe out your entire portfolio value. However, if you spread out your investment dollars among different asset classes then even if one or two of them perform poorly over a short period of time then it won't have as big of an impact on the overall performance of your portfolio.
3. Investment Management Helps Mitigate Risk By Avoiding Volatility Of Asset Classes
In Australia, people tend to think about volatility in terms of share prices only — but there are other asset classes that can also be volatile. For example, if you have a portfolio consisting of shares and property, then some years your property might do better than your shares, while other years it might not do as well as expected. If you don't have an investment strategy in place to manage these fluctuations effectively, then it can lead to unnecessary volatility in your overall portfolio performance. Our investment management service helps avoid this by managing assets across different industries and sectors so that no one sector dominates any one year's performance (or underperforms).
When you select a good investment manager, they will help you choose which assets are best suited for your needs and goals. They can also help you determine how much risk is involved with each investment so that you can make informed decisions about your portfolio. Chat with a financial advisor about investment management today.
The blog covers the idea of financial planning from the perspective of the client’s perspective. It will look at the benefits and risks of certain financial decisions and help readers to work out where the gaps are and how they can be closed. Financial planning is about planning for your future life. It’s not about just money, it’s also about work, family, savings and retirement. I'm not a financial expert but I've always been extremely interested in this area. I've done lots of reading about the sector and the various factors which are taken into account when planning your financial future.