When we talk of risk in investing, we often think of things that maybe out of our direct control, such as ‘market risk’, which is the losses that may stem from adverse movements in markets. Who really saw the COVID-19 shock coming?
There is also a range of other types of risk that may spring to mind; interest rate risk, currency risk, geopolitical risk, operational risk, manager risk, investment strategy risk, regulatory risk …. and the list goes on. We may as well give up now and stop investing!
However, when it comes to risk it’s important to remember that we have to tolerate risk in our everyday lives. Crossing the road can involve risk, but if we do need to cross the road, we need to be able to manage the risk of doing so, rather than avoiding it and never getting to the other side.
Risk avoidance in investment markets may not be possible, even if we do nothing. In fact, doing nothing can be a risk in itself and not all risks in investing are as defined above; some are behavioural and well within our control.
Let’s take a look at some of these.
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Ian Irvine - Guest Contributor
Ian has been a keen investor for over 40 years and can draw on his experiences from both investing on his own behalf and also having worked in financial services for more than 30 years. Over this time, he has seen many changes that impact investors’ attitudes to in what and how they invest.
He started his career in what is now referred to as fast moving consumer goods (FMCG) or grocery, working for an Australian margarine manufacturer. In 1986, he was recruited to Westpac around the time of deregulation of the sector, where he spent 10 years before taking a role at AMP and then with ASX for 14 years up to the end of 2017. He continues to be involved with ASX; working on their educational programs.
In 1996, he and his wife established their own SMSF and again the experience and lessons learned regarding managing an SMSF over the years have provided him with many insights and ideas. He enjoys sharing these with others where these are helpful and always suggest that if an investor or SMSF trustee is unsure, that they should seek appropriate advice from a licenced professional.
Ian holds a B. Com (UNSW), and lives in Sydney and enjoys travelling to and meeting investors and SMSF trustee at the educational events with which he has involvement with from time to time.