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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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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
25 votes
10 answers
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. ...
401k-newbie'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
  • 193
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
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
13 votes
5 answers
2k views

What should I do with the stock from my Employee Stock Purchase Plan?

I've got an employee stock purchase plan program. The details are a little tricksy, but I basically get to buy about 2500 shares of company stock at something like $2.33/share... and the stock has ...
user avatar
12 votes
1 answer
4k 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 ...
John Shedletsky's user avatar
9 votes
4 answers
958 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 ...
user1049286's user avatar
8 votes
3 answers
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 ...
rantsh's user avatar
  • 341
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
  • 17.1k
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
5 votes
2 answers
263 views

Does long term asset growth really converge to that derived from compound interest formula?

Many websites/experts claim that the longer you hold your assets, the likelier your asset's return is closer to that predicted by the compound interest formula. However, some other experts claim ...
Enno Shioji's user avatar
5 votes
1 answer
324 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 ...
Kartick Vaddadi's user avatar
4 votes
6 answers
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 ...
Joe.E's user avatar
  • 6,080
4 votes
1 answer
429 views

Is socialtrend.com or/and feelthetrend.com legitimate?

I'm not particularly literate about finance and market. One of my friend invited me in a 1-hour meeting about this Social Trend marketing of TheTrendSocial.com. Apparently buying one of their "kit" ...
user avatar
4 votes
2 answers
434 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 ...
Nosrac's user avatar
  • 6,839
4 votes
3 answers
635 views

What is the theory behind Rick Van Ness's risk calculation in the video about diversification?

In the video, Rick Van Ness states the following scenario: Stock A has a 7% return with +/- 1% risk Stock B has a 3.5% return with +/- 0.5% risk Stock A and B are perfectly negatively correlated. A ...
David Andreoletti's user avatar
4 votes
3 answers
6k views

How is the Efficient Frontier drawn?

I know efficient frontier is the collection of expected return on a portfolio and the level of risk(e.g. standard deviation). What I don't understand is that is the efficient frontier really drawn ...
Marcus Thornton's user avatar
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
4 votes
2 answers
266 views

Is there an advantage to international stock diversfication?

I'd like to reduce my risk of investing solely in the U.S. stock market compared to the rest of the world. However, my concern is that perhaps the U.S. stock market already has such international ...
glenviewjeff's user avatar
4 votes
3 answers
664 views

What proactive measures can be taken before or when a lender closes your credit card?

A blogger and contributor here recommended Digital Federal Credit Union (DCU) as a possible lender in my search for cash secured credit cards to establish my credit history, and I got approved for one ...
f1StudentInUS's user avatar
3 votes
6 answers
455 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 ...
cpotter's user avatar
  • 33
3 votes
3 answers
786 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 ...
Quora Feans's user avatar
  • 1,043
3 votes
1 answer
1k 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 ...
Victor Ronin's user avatar
3 votes
3 answers
293 views

Understanding Interest Rate Risk: What is it, and what techniques do I use to minimize it?

I'm looking to develop a fixed-income account of bonds and dividend-paying equities. I've heard that bonds are susceptible to interest rate risk, but I don't really understand what that means. What ...
Mashmagar's user avatar
  • 143
3 votes
1 answer
148 views

What's the role of commodities in a IRA portfolio?

People keep talking about percentage of stocks vs bonds to manage risk when building a personal investment portfolio. What's the role that commodities have in managing risk when building an IRA ...
Marsellus Wallace's user avatar
3 votes
1 answer
299 views

Does anyone know where I can find a free efficient frontier tool, or an informative and legitamate/academic graph of the efficient frontier?

I'd like to build a portfolio based upon modern portfolio theory and I'd like to find a tool I can use to calculate the proper mix of asset classes. Can anyone help with this? I think a good chart/...
Matty Mool's user avatar
3 votes
1 answer
116 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 ...
Dan's user avatar
  • 274
3 votes
1 answer
2k views

When to liquidate mutual funds for a home downpayment

I have about $18k in mutual fund assets that I am planning to use for a down payment on a home within the next 1-2 years. Combined cost basis for the assets in question is +$2,800. Right now the asset ...
Jeremy's user avatar
  • 1,033
3 votes
1 answer
78 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 ...
YellowEagle's user avatar
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
4 answers
223 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 ...
Victor's user avatar
  • 21k
2 votes
1 answer
189 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
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
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
2 votes
3 answers
418 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, ...
Stefan's user avatar
  • 123
2 votes
3 answers
1k 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 ...
user64362's user avatar
2 votes
1 answer
195 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 ...
Beginner'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
2 votes
2 answers
298 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 ...
Calmarius's user avatar
  • 521
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
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
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
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
1 vote
2 answers
197 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 ...
cruppstahl'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
1 answer
97 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 ...
OlivierLarue'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
  • 125
1 vote
1 answer
169 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 ...
traveler24662's user avatar