The turmoil of the stock market over the last decade has forced professional and individual investors to refocus their attention on identifying, managing and mitigating as many investment-related risk factors as possible. Michael Carpenter’s book, “The Risk-Wise Investor” (Wiley, 2009), offers a look at the evolution of risk and how investors today should plan for and protect themselves from market risk. Carpenter has spent over 35 years in the investment business as a financial advisor. He urges investors to take an honest look at risks and to face them head-on instead of waiting until it is too late.
While developing and implementing successful trading strategies is important, managing your portfolio’s risk is equally as important. However, protecting your investments from downside risk does not have to be complicated and, according to Carpenter, can be very simple once you have the knowledge and tools.
Risk management is not a new phenomenon, but has received much press over the last few years. Carpenter argues that individual investors should employ risk management tools and ideas just as businesses and professional investors do.
He also believes that everyone has the ability, knowledge and experience to manage risk naturally. Carpenter notes that successful management of risk and reward happens every day and transferring this knowledge to your investment portfolios is not hard.