Whenever you consider a potential investment, there’s always a considerable focus placed on achieving the desirable risk-reward ratio.
More specifically, people tend to tailor their investment choices and portfolio to suit their unique philosophy, whether they’re risk-averse or have an appetite for volatile markets that have the potential to deliver an exceptional return.
While this should inform the choices that you make, however, it’s important to remember that risk aversion should be considered as an investment strategy. The same can be said for those who prefer higher-risk investments, as the way in which you manage risk and strive to optimize your returns is far more important.
The importance of risk-reward and determinism
Successful traders have a tendency to be deterministic in their outlook, as they focus on the underlying laws that govern change in the marketplace and the individual elements of their investments that can be controlled.
This is where the preoccupation with risk comes from, as investors must prioritize markets that suit their outlook and are capable of delivering a viable and realistic return. By making considered investment choices, it’s possible to achieve a desirable balance between risk and reward and achieve greater control over capital deployment.
By themselves, however, the careful selection of markets and assets in relation to risk and reward cannot be considered as standalone strategies. Instead, they represent the foundation of a viable strategy and one that affords you the best possible chance of success.
Why risk management holds the key to successful investments
Once you’ve selected your assets and build a diverse and appealing portfolio, however, it’s how you manage this and the associated risk that will determine the success or failure of your efforts.
After all, all investment vehicles carry risk, and adhering too strictly to a risk-averse outlook could cause you to miss out on opportunities. Similarly, being wedded to the notion of risk can create an unbalanced portfolio and one that fails to deliver a viable risk-reward ratio.
Instead, you need to implement stringent risk management measures and apply these to your investments, such as securing the services of an advisory firm. Independent consultancies such as Hymans offer a relevant case in point, as they can help to structure your investments while offering actionable advice on how to proactively protect them.
If you like to invest through an online trading platform, it’s also worth using the automated risk-management features that are inherent to these resources. Take stop losses, for example, which can be applied to volatile and margin-based assets to automatically close positions once a predetermined loss threshold has been reached.
With this type of attention to detail, you can build on your unique risk outlook and create a practical investment strategy that delivers genuine rewards.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
Claris Ventures, €85 Million Closing for the Turin-based Sgr Focused on Early-Stage Biotech
Claris Ventures, founded by Pietro Puglisi and Ciro Spedaliere, is thus confirmed as one of the main Italian operators with...
Nine Ways to Make Your Blog More Engaging
Knowing how to make your blog engaging is one of the most important elements of any smart digital marketing strategy....
UrbanFisio Launches Virtual Assistant to Surpass €1 Million by 2021
The company UrbanFisio had a turnover of $1.03 million (€878,000) in 2020 and expects to reach $1.53 million (€1.3 million)...
How Rating Discrepancies Undermine ESG
According to some experts, companies with higher sustainability scores have better risk management and compliance standards, leading to fewer extreme...
Elon Musk Said Tesla Will Accept Bitcoin Again
After Tesla accepted Bitcoin as a means of payment in March 2021, the company revised the decision again just two...
Featured6 days ago
Markets May Have Hit a Temporary Top that Could Continue into September
Business6 days ago
Extended Reality Investment Alert: XRApplied (XRA) Conditionally Approved to List on CSE
Crypto5 days ago
Canada Continues to Embrace Cryptocurrencies
Business6 days ago
Why T-Bond Yields Increased in the Past Three Decades