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Strategies to manage investment risk

Exposure to risk is a big part of investing and although individuals cannot eliminate risk completely, they can implement strategies to manage risk and achieve their financial goals.

Managing investment risk is particularly beneficial in times of increased volatility and unfavourable economic conditions as well as ensuring investors meet their long-term investment goals. Here are three ways to manage investment risk:

Asset allocation
Including different asset classes (i.e shares, cash, property) in your portfolio can help to balance risk and return based on an individual’s age, risk tolerance, goals and investment time frame. As different asset classes will perform better at different times depending on the underlying economic conditions at the time, it is important for a fund to invest in a diverse mix of assets.

Diversification
Diversification aims to maximise an individual’s return by investing in different asset classes that react differently to the same event. Although it does not guarantee avoiding a loss, diversification is an important component of reaching long-term financial goals while minimising risk.

Regularly monitor investments
Be sure to regularly monitor each investment in your portfolio. This helps to ensure your investment goals are on track and remain in line with your risk profile. Keep on the lookout for warning signs that your investment might be heading downhill but don’t focus too much on short-term volatility for long-term investments. It is best to revisit your investment plan with your adviser at least once a year.

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News

Authority for super complaints introduced

December 14, 2018

The new Australian Financial Complaints Authority (AFCA) will make it easier for individuals and small businesses to make complaints about their superannuation financial firms.

The Coalition government has responded to criticisms of previous dispute resolution bodies by creating a new financial disputes framework. AFCA has been described as a “one-stop shop” that will improve outcomes for consumers and increase the efficiency of the dispute resolution process.

AFCA’s jurisdiction
AFCA has been given authority over a range of complaint areas including:

What you can make complaints about
Your super complaint to AFCA must adhere to its governing rules. AFCA has specific time limits for complaints but no monetary limits.

You can make complaints about: