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Investment strategy and risk management |
| After the global stock market bear market in 2000, investors suffered heavy losses. Investment banks and private bankers were questioned and dissatisfied by investors. Many people vowed never to invest again!
You don't have to be discouraged, and you should understand that there are very few investment experts. The real expert is yourself. Continuous learning and actual participation in financial management are one of the most important topics in life. |
| (1) Understanding Risk and Risk Tolerance |
Investment experts look at risk from a statistical perspective, while ordinary investors feel and manage risk from the perspective of potential losses and how much capital they have to deal with very possible losses. In an investment plan or portfolio, risk tolerance is usually quantified using risk indicators. |
| (2) Risk Management and Investment Periods |
Investment experts are skilled in using portfolio risk management techniques to reduce potential losses, or using hedging or stop-loss risk management techniques to preserve investment capital.
If the general investor's investment period is 10 to 20 years, the focus of the risk management is to reduce potential losses (volatility); if the investment period is short-term within one year, the focus of the risk management is to preserve the original investment capital.
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| (3) Absolute investment target |
Hedge fund investment experts develop investment strategies and related risk management techniques based on absolute return investment goals. When ordinary investors set absolute investment goals, they either determine them based on the cash needs of their financial plan or based on the average investment target during the investment period. Therefore, choosing a hedge fund basically meets its absolute investment objectives, but it is still necessary to judge whether the investment strategies of different hedge funds meet the needs based on the investment period of the investor's investment plan.
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| (4) Relative investment objectives |
Investment experts of traditional mutual funds are accustomed to taking market indicators or a basket of stock combinations compiled by stock exchanges or well-known international brokerages as investment targets. However, since market indicators or a basket of stock combinations cannot guarantee a positive average investment return over the long-term investment period, such investment targets are regarded as "relative investment targets." If investors adopt a relative investment goal, they will usually also pay attention to managing the volatility risk of the investment plan or portfolio. |
| (5) Investment Strategy |
The investment strategy should be based on investment tools, investment objects, and investment methods, and then be given clear investment goals, risk management methods, and investment periods to form a complete and systematic investment process. Investment tools can be traditional stocks, bonds, futures, or even real estate, or they can be investment products such as mutual funds, alternative (safe-haven) investment products, etc., that is, investment tools that have their own investment strategies.
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| (6) Investment products and investment strategies |
In addition to judging from the evaluations of well-known evaluation agencies, the quality of investment products also depends on the investors' recognition and needs of their investment strategies.
Recently, there are more and more investment tools under the strategic or technical asset allocation model, with mutual funds or hedge funds replacing stocks or bonds,
or investment tools also being It appears in the form of fund f funds, so it is more important to carefully choose suitable investment products and investment strategies.
It is particularly important whether the investment product can provide a clear risk management structure and process.
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| (7) Strategic asset allocation |
(Strategic Asset Allocation)，The investment period for general investors or their investment plans is at least 10 years; the investment period for institutional investors is at least 15 to 20 years. The investment portfolio approach that emphasizes the combination of different asset classes, such as stocks, bonds, cash or futures, is called the strategic asset allocation process, with the greatest goal of reducing the volatility of returns that deviate from the absolute average investment return rate over a long period of time. In recent years, due to the excellent investment performance of many hedge funds and the small volatility of returns, well-known investment banks such as Morgan Stanley have also regarded them as an asset class and included them in their recommended strategic asset allocation portfolios for use by global institutional investors. |
| (8) Technical asset allocation |
(Tactical Asset Allocation)，The investment period of an investor or his/her investment plan is usually within 2 years, or even as short as 6 months,
and his/her investment method emphasizes the grasp of market timing.
Individual stock investors also often transfer investments between stocks and cash assets. In the early years, the Quantum Hedge Fund led by Soros also emphasized the importance of seizing the opportunity to reverse the foreign exchange market. However,
if technical asset allocation lacks an appropriate risk management framework and process, it will usually result in excessive investment risk. Investors should pay special attention to this. |
| (9) Fund of Funds |
In order to effectively carry out strategic asset allocation or technical asset allocation for their clients, investment advisors often launch fund of funds investment products. In addition, as alternative investment products have gradually become a major asset type for strategic asset allocation, fund of hedge funds has also become one of the favorite investment products of investors in recent years. |
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