Modules for Traders

Introducing the statistics of risk

1. What is risk? 2. Risk and your portfolio play Introducing risk 3. Portfolio risk: Variance and covariance 4. Introduction to matrix mathematics play Introducing the statistics of risk 5. The variance and covariance matrix 6. The correlation matrix and the variance of a portfolio play What is market risk? 7. Decoding expected returns and estimating the portfolio range 8. How to optimize a portfolio to manage risk? play How to account for risk when building a portfolio? 9. Introducing Value at Risk (VAR) 10. Avoiding vs. reducing risk play The investor's guide to reducing risk Glossary: 20 terms that will introduce you to risk and the statistics involved

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The investor's guide to reducing risk

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This video discusses three tried and tested ways in which an investor can reduce risk.

Transcript

Whether you invest in one asset or in a mix of assets, risk is inevitable. You may not be able to eliminate risk altogether. But you can certainly reduce the risk in your portfolio. Here are three tried and tested strategies that can help. Firstly, ensure that you diversify your investments. Investing too heavily in one asset or asset class can increase the portfolio risk. Secondly, monitor your investments regularly. Changes in the prices of the assets could increase the overall portfolio risk. So, ensure that you evaluate your investments periodically to keep the risk at a tolerable level. And lastly, do not invest more than you can afford to lose. This helps safeguard your funds to a large extent. Interested in learning more about risk and risk management? That’s just what the next module in Smart Money deals with. Check it out.

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