Manage investment risk in three steps

Conclusion Broadly speaking, investment management concerns optimal expenditure of risk budgets. To this end, diversification, hedging and insurance represent three complementary rather than competing techniques. Diversification should be used to achieve efficient risk-adjusted returns; hedging should be used to control systematic risks such as interest rates and inflation; and, finally, insurance should be used to implement downside protections. Academic research in dynamic portfolio theory suggests the three techniques can be used together.

 

Leave a Comment

AMP Super shielded from crypto rout by early Bitcoin trim

AMP Super slashed its investment in Bitcoin futures ahead of the abrupt crypto sell-off last week, saying it had been an "excellent test" of its forecasting model's ability to de-risk when required.

Sort content by