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The Importance of Managing Risk and Having a Balanced Portfolio During Different Economic Cycles

When it comes to investing, there is no one-size-fits-all approach. Depending on your goals, risk tolerance, and time frame, your portfolio will look different than someone else's. In this blog post, we'll take a look at the importance of managing risk and having a balanced portfolio during different economic cycles.

The first step in creating a balanced portfolio is understanding your risk tolerance. Risk tolerance is the amount of risk you're willing to take on in order to earn a higher return. There is no magic number, as a general rule of thumb. Many say that you should have a higher risk tolerance when you're younger and can afford to take on more risks (since you have time to recover from any losses), and a lower risk tolerance as you get closer to retirement. But this is not entirely true and there are so many levels and kinds of risk even in those years. That we create special assessments and even offer them for free at our Risk Management division.

Once you know your risk tolerance, you can start to allocate your assets accordingly. You will probably need to have a mix of stocks and bonds that's in line not just with your age as old-school theories suggested but with your goals, personal situation, current global economy, and timeline in your life.

Of course, these are just general guidelines - ultimately, it's up to you to decide how to allocate your assets based on your individual circumstances, and nothing we say here is advice tailored to you. For tailored advise, you would need to go through our risk assessment and talk to a wealth manager.

No matter what stage of life you're in or what the market conditions are, it's important to remember the basic tenets of investing: managing risk and having a diversified portfolio. By understanding your risk tolerance and allocating your assets accordingly, you'll be well on your way to achieving your financial goals.


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