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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1answer
43 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 ...
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1answer
53 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?
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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 ...
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1answer
72 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 ...
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2answers
125 views

Forward contract hedge and market-maker

Referring to McDonald's Derivatives Markets book, a market-maker or arbitrageur must be able to offset the risk of a forward contract. It is possible to do this by creating a synthetic forward ...
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2answers
106 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 ...
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1answer
80 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 ...
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1answer
83 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, ...
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2answers
237 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 ...
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1answer
695 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 ...
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1answer
115 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 ...
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2answers
159 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 ...
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4answers
222 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 ...
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1answer
113 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 ...
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1answer
480 views

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

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 ...
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4answers
71 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 ...
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1answer
79 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 ...
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10answers
17k views

How can I protect my 401(k) when the stock market is performing badly?

I just opened my 401(k) at the beginning of 2017. In 2017 it did great because of the bull market, but since 2018 I've lost about $1,000. All of my contributions this year have been a complete waste. ...
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47 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 ...
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10answers
12k 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 myself, and many others, away from the stock market. Before I explain it, let me mention some selected popular questions on this ...
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4answers
196 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 ...
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1answer
129 views

Stock market fluctuations and when to sell out [duplicate]

I recently bought a medical marijuana stock at its lowest point. It is estimated that it will reach a high price by 2023. How can I know for sure when to sell out?
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1answer
180 views

Outsourcing rental risk: selling right to rent house?

I am wondering whether there is a way to get rid of the risk associated with renting a property one owns by selling the right to rent that property for a certain period? I am especially interested in ...
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3answers
2k views

Forex vs day trading for beginner investor

In essence, for a person that has not had any real experience with either (except for playing around in simulators like investopedia): which one would an individual have the most potential to ...
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57 views

Options trade - statistically expected return calculation?

I also asked this question here, for it to get more visibility. I am calculating expected return for composite option strategies based on event probabilities provided by the broker. For example, ...
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3answers
471 views

Should we consider real estate investment low, middle or high risk?

Should private investors investing in a specific (that is, not through some fund) real estate treat it as low, middle or high risk? Issues I consider: It's true that things move slowly in real ...
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3answers
343 views

Best way to cash-out for passive income

First, my investing knowledge is very limited (still new to this, still learning). Second, my question is somewhat unfocused, sorry about that but I hope that there is a somewhat concrete answer, ...
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1answer
128 views

U.S. 10 year treasury bonds behavior during crisis

It's often advised to buy and keep government bond to protect ourselves against the next upcoming crisis. (For example, in a defensive stock portfolio you can have 50% of stock and maybe 30% of ...
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2answers
170 views

Risk management strategies for ETF portfolio

I have an ETF portfolio (MSCI World, Euro Stoxx 600) and I'm following a "buy and hold" strategy. But I would also like to learn more about risk management strategies. More precisely, I'd like to ...
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1answer
539 views

What kinds of ETFs weathered well the 2008-2009 financial crisis?

I started to do research on which ETFs kept or increased their value over a recession in 2008-2009. I saw a lot of articles which says "invest in X, because X is always in demand (even in crisis)." X ...
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2answers
803 views

Should I have more than one brokerage account?

I have my brokerage business with one particular well-known US brokerage house. I find being able to access my retirement accounts and personal investment accounts through the one interface useful. ...
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6answers
419 views

Rational risk-assessment decision framework: Should I buy health insurance?

Update: I've posted a sub-question on the math stack exchange to help answer part of this primary question. Sub-question: Toy problem: How much should I rationally be willing to pay for this ...
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1answer
131 views

Is the issuer of an ETF a risk to consider?

When it comes the price of an ETF, I understand that it reflects the value of the underlying assets. What happens where a company that issues ETF comes into play on the decision of people whether to ...
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1answer
102 views

How often do regular businesses hedge their economic risks?

It's claimed that derivative instruments were made to allow real businesses to hedge their risks (unpredictable increase of supplies price, decrease price of the product in the future and so on, ...
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1answer
59 views

What are the ways to price a holding company?

I would like to know how people value holding companies. I guess the most famous one is Berkshire ($BRK.A - $BRK.B). And others exist. These holdings usually have a lot of exposure to realestate, PE ...
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4answers
930 views

Worried about wife's spending habits with impending lump sum

My wife of 18 years has a problem with money. She has stolen from banks using my identity, falsified documents to get cars, and has been to prison over it. I pay for everything and give her ...
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2answers
1k views

Break Even On Options Contracts

Given a calendar options contract (sold 1 month out, bought 2 months out same strike price) and someone says to look to adjust/close out the position at the break even points. Do they mean break even ...
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1answer
187 views

How can I defend my wealth from targeted attacks?

The more money I save the more paranoid I become about it. I have two concerns: Someone I argued with years ago sues me to squeeze out some money from me. The government itself wants to take my ...
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1answer
109 views

Setting and measuring risk profile target for retirement account

I understand that as you age you want to slowly lower the risk profile of your retirement account, but how should I determine how much risk I should take on currently and how do I measure how much ...
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1answer
646 views

How can I combine winrate, (risk/reward), and expectancy into a single formula?

winrate = wins / (wins + losses) I fiddled around with it and found that: requiredWinrate = risk / (reward + risk) Expectancy formula expectancy = (winProbability x averageWin) - (lossProbability ...
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3answers
874 views

How can I calculate the volatility(standard deviation) of a stock price? and/or ROI (return on investment) of a stock?

I'm trying to build my first portfolio, I've already have set out my monetary goals, graded my risk tolerance and determined the asset allocation I wanted to go with. So, now for the next step I need ...
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1answer
79 views

Which market orders to meet this recommendation : 'Take a position on the purchase of the fooBar share, protect your capital by placing a stop'

I'm just getting started in the process of learning how to trade. I just wanted to know how should I interprete the following sentence : "Active investors will take a position on the SYNERGY share ...
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1answer
969 views

Finding Uncorrelated Assets

I own a particular security. How can I find another security, which has uncorrelated or negatively correlated (anti correlated) returns with the one I already own? I would like both securities to ...
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6answers
3k views

For a mortgage down-payment, what percentage is sensible?

In Australia, even after the global financial crisis, it's still common to only have 5-10% and some people even use other assets as collateral to borrow all 100%. I hear historically this has not been ...
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1answer
195 views

What makes one smart and/or successful in investing? [closed]

Pretty broad question, but I hear these things thrown around a lot and was wondering if such a canonical or straightforward definition exists. To make this simple: What makes an investor "smart" as ...
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2answers
415 views

What are some signs that the stock market might crash? [closed]

I have about one year of experience as an investor and my goal is to aggressively grow my portfolio over the next 40 years for retirement. I have had good success achieving my goal over the last year ...
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2answers
158 views

How to mitigate the risk of Euro Stoxx 50 ETF?

I started building my retirement portfolio with an Euro Stoxx 50 ETF. To minimize the risk a bit I would like to buy another ETF (and have both 50-50 in my portfolio). Is buying a blue chip stocks ETF ...
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1answer
232 views

Is the risk premium with insurance higher or lower than investments?

Insurance of any kind is always going to have a lower expected value than self-insuring. If there's a 10% chance of a loss of ₹100 occurring, insurance companies will charge more than ₹10, to cover ...
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1answer
3k views

Is there extra risk in owning an ADR vs. the underlying stock?

One of my favorite on-again-off-again recovery plays is Mittal Steel (NYSE: MT). I buy the MT ADR there (American Depositary Receipt) because I live in the US. Am I exposing myself to any extra risk ...
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4answers
198 views

Can the risk of investing in an asset be different for different investors?

If 2 people invest the same amount in the same asset at the same time, will their risk be different if they use different risk management strategies? Say Inventors A and B both buy 1000 shares in ...