Michael C. Stalker

Risk Tolerance

While academics and investment professionals define risk as “fluctuation” or “volatility,” most people see risk as the possibility of incurring a loss.  An investor who experiences a dramatic increase in the value of a stock, for example, may not see it as risky or volatile.  Instead, the rise is interpreted as a confirmation of a …

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Portfolio Stress Testing

Portfolio Stress testing is an approach that looks at the risks and potential losses an investor faces. The process is both a science and an art. The science is in knowing how various investments have historically behaved. The art is in interpreting historical data and applying it to the current situation. A good stress test …

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True Diversification

A truly diversified portfolio contains securities that zig when other securities zag.  That means owning stocks, bonds, or mutual funds that do not react in the same way to a given economic environment.  For example, many investors make the mistake of buying a portfolio of recently top performing funds.  What they can wind up with …

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