Weekend Reading: Risky Business

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

How should you measure risk? Although traditional quantitative tools exist to help control risk in an investment portfolio (Sharpe ratio, Treynor ratio, etc.), these can also be misleading because risk is multidimensional and sometimes psychological.


Navigating risks you don’t see: The failure of Silicon Valley Bank and the COVID-19 pandemic are two examples of risks that quantitative measures couldn't detect. Despite these challenges, what can you do to elevate investment risk management? Author Adam Grossman suggests the following:

📌 Don’t rely on a single measure of risk, but instead consider risk measurements only as part of a mosaic.

📌 Utilize history to better understand the character of risk (i.e. market downturns) – And, don’t dismiss any risk because everything has some probability, even if it’s low.

📌 Recognize that risk is personal. Some risks may have positive or negative effects depending on your circumstances.

📌 Maintain a balanced approach to risk evaluation using the mindsets of an optimist, pessimist, analyst, economist and a psychologist to help navigate the landscape of risk.

You have a unique personal risk tolerance and risk capacity. It shouldn’t be based solely on rules of thumb or simple measurements, but a variety of factors that paint your overall risk “picture”.