Maximizing returns for your risk tolerance.
The Key is Risk-Adjusted Return
Investment Risk Management: Finding the Right Balance
Investment risk is about marketplace volatility. But it is just as much about you — your goals, your personality/temperament and your asset base.
We keep the focus on your risk-adjusted return, which is the potential investment return in relation to the level of risk. Sometimes the potential return is not worth the risk. Or it might be generally worth the risk, but not for you.
At LNW, risk management is a careful calibration intended to align marketplace volatility with what is right for you.
We believe in fully informed risk-taking grounded in real life. That means we assess risk in all its many forms and in relation to your goals. Certainly, price volatility is a concern but there many other types of risks that can destabilize large portfolios, including capital loss, unreliable cash flow, stagnant growth, the erosion of purchasing power (inflation), investment fraud and the risk of cognitive bias or emotions negatively impacting decisions.
We apply multifaceted risk analysis, including quantifying market risk, asset price correlation and “what if” scenarios to arrive at an optimal level of portfolio diversification based on:
- The range of investment risk you and your finances can realistically tolerate
- The minimum level of risk your portfolio(s) needs to take to grow at a rate that can fund multi-faceted, long-term goals
Our focus on risk-adjusted return does not mean we are risk-averse. Whatever level of risk you are able, willing or need to take, we analyze the components of that risk and whether you are being adequately compensated.
Our aim is portfolios with risk levels that are appropriate for your circumstances and the targeted wealth accumulation necessary to pursue your goals. Our diversified approach intends to limit the severity of difficult markets in context of a long-term investment horizon, allowing your portfolio to benefit from the power of compounding to generate the return needed to achieve your goals.
Our role in the client-advisor relationship is especially important during turbulent market cycles, when we work with you to mitigate emotional decision-making that can derail decades of wealth accumulation.
The highest return for the level of risk right for you
Using realistic risk parameters and knowing what your needs are, we can adjust the asset allocation in your portfolio to aim for more reliable cash flow and lower price volatility. A higher comfort level with your portfolio in context of your overall finances makes it less likely that you would feel compelled to exit the market during a steep downturn, locking in losses and potentially missing out on the rebound.
Managing risk at the source: Due diligence on asset managers
In each major asset class, we vet managers using proprietary, data-driven analysis and in-depth interviews. We invest only with asset managers we are convinced can deliver the risk-adjusted, long-term returns you need to attain your goals. Each step in this process is designed to provide insight into what is driving valuations in each asset class as well as the strengths and weaknesses of each manager.