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Questions tagged [risk-management]

Risk management is the process of identification, analysis and acceptance or mitigation of uncertainty in investment decisions.

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Can shares be recovered from a broker you can't reach?

At the risk of sounding paranoid, I'm curious about how one mitigates the risk that your country could collapse due to internal strife. Hypothetical: Investor owns shares in two companies (A and B), ...
William Walker III's user avatar
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0 answers
30 views

Currency hedging for intra-month expense FX rate risk as a US expat = only net drag?

I've been curious for a long time now about a specific hypothetical scenario for my personal situation. I'm a US citizen living and working long-term in Switzerland, and I've kept most of my day-to-...
Connor Benton's user avatar
-2 votes
3 answers
343 views

What percent of a portfolio should be directed to high risk assets to enable outsized returns?

Over the years, I predicted a few assets that went up in price a ton. However, I never owned any of those assets. Stuff like FAANG, Tesla, Bitcoin. Had I invested in those at a young age by the time I ...
ZeroPhase's user avatar
0 votes
2 answers
139 views

How to keep an upfront payment to cover a year of living costs, with additional savings

My (romantic) partner received a scholarship of roughly $12,000. We live somewhere (in Europe) where this is just about enough to cover a year of living expenses for one person. They will receive the ...
user115815's user avatar
0 votes
2 answers
242 views

How to simulate a stop-limit order, stop-loss, and take-profit in backtesting?

I'm working on backtesting a strategy. I need to simulate stop-limit order, stop-loss, and take-profit. Here's my understanding of these concepts: Stop-limit order: You ask the broker to buy the ...
A User's user avatar
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1 answer
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Is it better to invest on safe asset as one gets older?

I heard that as one gets older, one should invest more in safe assets such as bank accounts. I would like to know the rationale for this recommendation. For example, this Investopedia webpage ...
user67275's user avatar
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14 votes
3 answers
4k views

Are there risks or hidden costs of buying a CD from a bank I don't have an account with?

I'm the treasurer for my church and we have $100K saved up to replace the roof of the sanctuary. It'll be a year before we need the money, so I thought I should probably take the money out of savings ...
B. Goddard's user avatar
1 vote
1 answer
116 views

Risk Per Trade Calculation

I have a little confusion regarding my risk per trade management. I am unclear if I need to calculate this absolute amount each time with the new account value or the risk per trade is calculated once ...
Jôsùå's user avatar
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3 answers
270 views

What percentage of funds to allocate to different investments optimally with rebalancing?

There are 2 types of managed funds. The first is principal guaranteed with a fixed 5% annual return. The second's returns is between 20% to -20% annually. Is there a way to roughly calculate what ...
surewin's user avatar
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-1 votes
1 answer
98 views

What percentage of companies could have a consistent lower "return on capital" to its owners/shareholders and a higher risk than the S&P 500?

What percentage of companies/startups in the US or any other country could have a consistent lower "return on capital" to its owners/shareholders and at the same time a higher risk than the ...
user96769's user avatar
1 vote
2 answers
220 views

Best practices for protecting retirement savings?

Let's say my nest egg is in ETFs in a taxable account and an IRA with the same brokerage. SIPC insurance may cover me "if the firm fails financially", and only up to $500,000. That is per ...
Ken - Enough about Monica's user avatar
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1 answer
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Financial and/or credit risk management

A portfolio consists of two (long) assets £100 million each. The probability of default over the next year is 10% for the first asset, 20% for the second asset, and the joint probability of default is ...
Win_odd Dhamnekar's user avatar
0 votes
1 answer
94 views

Understanding buying power and position size relative to fixed percentage risk on total capital in any given trade?

I'm trying to wrap my head around understanding buying power, position size and how it's relative to how much I can risk in any single given trade depending on my initial total capital. For example, ...
TheAmazingKnight's user avatar
-5 votes
1 answer
346 views

How to prepare for a war [closed]

I understand that the value of investments in debt, equity, paper currency, bonds, and in physical properties all go down if the country gets into a major war. What is the best strategy to be prepared ...
wor-ried's user avatar
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1 answer
421 views

Reasons to not have multiple investment accounts to avoid SIPC limit

Most brokerages in the US are members of the SIPC. The SIPC provides an insurance for customers up to $500,000 for cash and securities held by the brokerage in case of troubles (bankruptcy, assets ...
FettFrank's user avatar
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0 answers
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Quantifying and hedging for FX risk

So I am new to investing and currently use an AUD account to invest, but mostly trade USD denoted instruments (mainly XAUUSD). Therefore I am getting unwanted exposure to AUDUSD because of the ...
kevin white's user avatar
19 votes
3 answers
4k views

Why would long-term investor care about volatility? [duplicate]

I'm 35 and I want to start investing for my retirement. My question is, why would you care about volatility if your investment horizon is 30+ years? In order to get a more clear picture of volatility ...
Mark's user avatar
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3 answers
1k views

Is there a quantitative answer to how frequently I should optimize my portfolio?

I'm using Markowitz Mean-Variance Optimization to rebalance my portfolio of 30 holdings. I'm trying to select the best balance of funds that will return 10% with the minimum risk. I understand that ...
Quark Soup's user avatar
0 votes
1 answer
368 views

Why do the traders prefer 1% rule instead of kelly criterion?

Kelly criterion determines the optimal theoretical size for a trade based on historical data of trader. However, I know many traders strongly recommend to not risk more than %1 of their balance and ...
Jimmy's user avatar
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0 votes
1 answer
526 views

Calculate stock price range using standard deviation

New to stock investing hence reading up a few tutorial to better understand stocks/stock market. Came across a chapter that says, "Understanding risk with the stock market" and it says that ...
Manish Bathla's user avatar
1 vote
2 answers
158 views

What are the risk types for a large amount of savings in an index fund

I'm curious what are the possible things that can go wrong with storing half of savings in a single index fund. Specifically, I mean things other than the market going down - these are long term ...
viraptor's user avatar
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1 vote
0 answers
131 views

Are there any studies on the success of day traders? [closed]

If you know about any published research paper on trade accuracy or from broker perspective that what percentage of clients are profitable in day trading.
Dank trader's user avatar
0 votes
2 answers
215 views

How can I determine how much improvement (dollar value wise) I can put on an urban lot?

So, I'm in the position of considering where (within a given city/real-estate-market) I and my family want to build our next house (which will also be our first experience as homeowners -- we've lived ...
ThreePhaseEel's user avatar
1 vote
1 answer
174 views

A trading program that modifies its own risk management?

The idea is that the machine would learn what level to put stops at, and where to put take profits. For example, the machine gets input about security ABC and learns the best place to put a stop. It ...
mteam88's user avatar
  • 55
1 vote
0 answers
119 views

Investing recurring aggregated short-term funds

I have half a dozen "buckets" of short-term cash sitting in money markets; e.g., vacation fund, unforeseeable house repairs, a post-COVID wedding reception, etc. Looked at individually, none ...
Ian Dunn's user avatar
  • 271
-4 votes
1 answer
158 views

Is flipping a coin with good risk management profitable? [closed]

I researched many trading strategies online, and in books, and most of the strategies said that a good risk management system was possibly more important than the strategy itself. I heard phrases like ...
mteam88's user avatar
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2 votes
3 answers
265 views

Should I invest 50% of my savings (20K) into a family business?

Somebody in my family is proposing an investment opportunity. The deal is as follows. You put 20K and he is going to use it to sow rice, the return depends on the price per kg of rice but he tells me ...
Mauricio Rondon's user avatar
2 votes
1 answer
188 views

Self-funded & fully-funded health insurance plans for small businesses

Imagine that a hypothetical small business in the U.S., MoneySavers, is setting up a health insurance plan that it will offer to its employees. I'm looking for clarification on any misunderstanding ...
ninja star's user avatar
2 votes
1 answer
156 views

How does Sharpe Ratio work and what are the disadvantages of using it?

I am trying to understand Sharpe Ratio and I have tried to calculate it and compare it with Sharpe Ratio value from Yahoo Finance. I took daily closing prices for SPY from February 1st, 2018 till ...
Joe Rakhimov's user avatar
1 vote
1 answer
54 views

Life insurance and its risks on the insurer and the insured

Consider a life insurance contract designed for independent workers who have little salary and are afraid to lose their retirement opportunity: for example, they will always be obliged to work even ...
Christina's user avatar
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1 vote
1 answer
360 views

How to manage the money I got from "lump-sum housing lease"?

In South Korea, there is a concept called "jeon-se", which can be roughly translated into "lump-sum housing lease" or "long-term rental deposit". It goes like this: An ...
user2652379's user avatar
2 votes
1 answer
94 views

Full investment in Forex with no leverage vs partial investment with high leverage

Assume two investors with $100,000 each, willing to invest them in Forex as scalp. Investor (a) Funds a brokerage account with the full $100,000 each trade is executed with the full $100,000. trades ...
null_pointer's user avatar
0 votes
1 answer
79 views

Is it possible for a stock that is consecutively trading above $1 to get delisted?

Is it ever possible that a stock that is consecutively trading above $1 to get delisted? If so, how, and for what reasons? And if it happens, how often does it happen?
frosty's user avatar
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13 votes
5 answers
4k views

Risks of using home equity for high risk market investing

I bought a home after the market crash in 2009 and I have quite a bit of equity in it now (100k). I still have 20 years until I retire and currently my main brokerage account is very high risk / high ...
Jacksonkr's user avatar
  • 943
2 votes
1 answer
230 views

Is this Money Market Fund giving negative yield?

I had a question about interpreting money market fund metrics that was answered here, but which raised a new question. Schwab SWVXX is a money market fund which has a Gross Expense Ratio of 0.34% and ...
Gramatik's user avatar
  • 427
0 votes
2 answers
909 views

What are the risks for a Canadian opening a Delaware corporation?

I am a Canadian, living in Canada, born in Canada to one Canadian and one Canadian/American parent, which makes me an American "Person". This means I am responsible for filing and paying ...
Curious1's user avatar
  • 109
0 votes
1 answer
168 views

Can a risky asset have negative beta coefficient?

I have a question from my tutorial asking whether Can a risky asset have negative beta coefficient? I can only think of how this is possible only if risk-free rate is more than the expected returns, ...
JJ Lin's user avatar
  • 9
-3 votes
1 answer
158 views

Does a high beta indicate a higher risk of bankruptcy?

I recently asked Should retail investors learn and use the capital asset pricing model (CAPM)?, where a good answer mentioned that "beta" is a rough measure of risk, measured based on the ...
Flux's user avatar
  • 17.1k
4 votes
2 answers
275 views

What is the most risk-free way to invest a lump sum of cash for 1-2 years? [duplicate]

I received a signing bonus with my most recent position for which, if I leave the company after one year I must return half, and can keep the entire amount if I stay two years. I am a very risk-averse ...
Gramatik's user avatar
  • 427
5 votes
1 answer
767 views

Should retail investors learn and use the capital asset pricing model (CAPM)?

I heard that the capital asset pricing model (CAPM) is commonly studied by finance students, and can help in controlling risk in stock portfolios. The CAPM looks rather complex as it seems to require ...
Flux's user avatar
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0 votes
1 answer
150 views

Is it better to invest FULL savings, in a home before marriage, or PARTIAL savings after marriage (50/50 contribution with spouse)?

My question is around the safety of my brother's investment (Washington State, USA) if shit hits the fan and his marriage falls apart. He is planning to buy a property now (huge investment) but our ...
stack_r's user avatar
  • 31
-4 votes
2 answers
244 views

How would the discovery of El Dorado impact the price of gold? [closed]

I have gold in my long-term investment portfolio and I am worried about sudden over-supplies of gold. If a City of Gold (e.g. El Dorado) or the Nazi gold train is discovered in the future, how can I ...
Thomas Gold's user avatar
0 votes
4 answers
709 views

Is it reasonable to split my money across two banks for security?

I am working to build an emergency fund, so I have money available in case I need it. I have read advice about keeping money split across multiple banks, for security. The idea is: if one of my banks ...
brownfox's user avatar
1 vote
1 answer
294 views

Is there a currency risk in UCITS ETFs?

I'm interested in buying ETFs that track the US market, but because of the latest EU MiFID regulations, I'm only allowed to purchase investment products that come accompanied by some "KID", a Key ...
Paul Razvan Berg's user avatar
5 votes
1 answer
502 views

Minimize risk of losing a lot of value for your savings during the corona crisis [closed]

Which investment possibilities are there for minimizing the risk that your cash savings (for simplicity let's say 100,000$) will severely lose value during the corona crisis? The focus is on avoiding ...
DaveBall's user avatar
  • 193
1 vote
4 answers
93 views

Pensions and personal circumstances, assessment and alternatives

Pensions are very popular financial products, and are quite strongly encouraged, both through favourable tax laws and employers contributions. In all cases I am aware of, neither the contributions ...
Dave's user avatar
  • 823
2 votes
1 answer
180 views

What happened to LTCM (Long-Term Capital Management)?

I recently learned about the LTCM fiasco and I find it ludicrous. From Wikipedia: Initially successful with annualized return of over 21% (after fees) in its first year, 43% in the second year and ...
Paul Razvan Berg's user avatar
0 votes
0 answers
51 views

Are uninsured financial institutions riskier places to keep my wealth, now that cryptocurrencies make embezzlement easier?

Suppose that one or more high-level officers at a stock brokerage, or other retail financial institution, decide to embezzle most of the assets held there. The embezzlers liquidate the assets into ...
NotAnAccountant's user avatar
69 votes
10 answers
13k views

If a broad long-term investment in the stock market is such a good deal, why don't banks do the "obvious" things?

There is a fundamental discrepancy or paradox that has been keeping me, and many others, away from the stock market. Before I explain it, let me mention some selected popular questions on this site in ...
B K's user avatar
  • 824
1 vote
4 answers
236 views

Is it true that you can't take money out of the market using only risk management?

Is it really true what a lot of traders say: that in order for you to make money in the stock market it suffices to use risk management? For the following reasons, I think it is not true: Suppose ...
PtF's user avatar
  • 121