Managing Risk In Your Investment Portfolio

    

 

A Conversation with EP Wealth Advisors Director of Portfolio Strategy - Adam Phillips, CFA®, CFP®

Often quoted in major national media, Adam is a Chartered Financial Analyst (CFA®), a CERTIFIED FINANCIAL PLANNER™ (CFP®), and has been included on the Forbes Next Gen Best-in-State Wealth Advisors 2019 list. He is a member of the CFA Society of Los Angeles and the CFA Institute. Adam helps establish asset allocation strategy as a member of the EP Wealth Investment Committee, which supports all EP Wealth Advisors and their clients. The Committee’s top-down approach to portfolio construction begins with an outlook on the economy’s likely direction, followed by the implications for different economic sectors and asset classes. This culminates in strategic selection of the individual stocks, bonds, mutual funds or other investments deemed most appropriate for each individual client’s portfolio.

Detecting Portfolio Risks

As we’re balancing risk and balancing diversification in our clients’ portfolios, one of the specific things we look for is concentrated positions. For example, a stock may have been amazingly popular and a very good investment over the last several years. Or perhaps you work for the company and have accumulated quite a few shares. But now it may represent too much of your portfolio, or it’s become so overvalued that continuing to hold any shares carries considerable risk. You may have a psychological bias in favor of that stock, or some other hurdle that’s preventing you from selling it and reducing your risk. An objective, independent financial advisor can identify investments such as this that might be problematic, and help you take whatever actions may be in your best interest.

Assessing Your Risk Tolerance

More generally, whatever stage a market may be in, it’s good to take a look at your tolerance for risk and whether your current portfolio is appropriate for that. If you haven’t seen a steep selloff in some time, it’s easy to say, “Yeah—I can handle some risk. I can handle a 20 percent or 30 percent drawdown.” But can you really? In many cases, we find that when people actually see some volatility, they realize their risk tolerance wasn’t as high as they thought it was.

Opportunities that May Exist in a Down Market

Or perhaps the market is down, and now you’re holding less in stocks—and have less upside potential in a market rebound—than your risk tolerance might support. Regularly reassessing your financial plan, or creating a plan if you don’t already have one, lets you simulate what various market scenarios can actually do to your portfolio. Sometimes seeing this can go a long way toward helping you make the right moves so you don’t make potentially costly missteps when the market throws you a curve.

How Can You Benefit from a Strategic Approach to Investing?

With a staff of professionals and access to sophisticated analytical tools, EP Wealth offers a comprehensive range of services to help you invest with greater insight, as well as develop a holistic wealth management strategy. To discuss your finances and investment goals, we invite you to contact one of our advisors.

This is #2 in the Informed Investor “How to Build Your Investment Portfolio” series. Other topics include Asset Allocation, Why We Diversify, How to Buy a Stock, How to Buy a Bond, Concentrated Positions, etc., etc. For more information on our investment process, check out our investment management page or ask for a Portfolio Review.

 

Disclosures:

  • EP Wealth Advisors (“EPWA”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented in this report. EPWA has used its best efforts to verify the data referenced. The information presented was obtained from sources deemed to be reliable. However, EPWA cannot guarantee the accuracy or completeness of the information offered. All expressions of opinion are of the presenter and are subject to change without notice.
  • Past performance is not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment or strategy, or product made reference to directly or indirectly, will be profitable or equal to past performance levels. Future financial conditions and events can never be accurately predicted. No analysis, plan, or report has the ability to accurately predict the future.
  • Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions with the appropriate professional(s). Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice. Always consult a professional Financial Advisor before implementing or applying any of the approaches or strategies made referenced to directly or indirectly here.
  • Any direct or indirect references to investment allocation, specific securities, security sectors, or any investment vehicle(s) should not be taken as a recommendation or solicitation to buy or sell a particular security or invest in any specific investment strategy. There is no guarantee that any of the information or investment strategies discussed will be suitable or profitable.
  • Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. There can be no assurances that a portfolio will match or exceed any particular benchmark.
  • Hiring a qualified advisor and/or diversifying your portfolio do not guarantee investment success, and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any results, projections, or other information being represented in this presentation will be met or sustained.
  • All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions, may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio. There is also no assurance that a portfolio will match or outperform any particular benchmark.
  • EP Wealth Advisors, LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not constitute an endorsement by the SEC, nor does it imply that EP Wealth Advisors Inc. has attained a certain level of skill or ability.

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