Sunday, August 7, 2011

Managing Risk Means Not Having to Say You are Sorry

In recent weeks, the consensus view in the investment community has quickly retrenched from expecting a strong second half for 2011 and beyond to concerns about: 1) limited visibility into 2012, 2) the Eurozone having its “Lehman moment” and 3) the potential for an economic double dip. Comments by Emerson Electric Co. CEO David Farr, this past week, captured the mood: "We're looking at slower growth” and "I can't tell you right now what the second half will be, I can't tell you what 2012's going to be, so don't bother to ask”.

Investing is a complex and multifaceted endeavor where success requires both having and executing a solid risk management strategy which assesses many factors that can alter the investment landscape. Please note that: 1) not every investment strategy is effective in all parts of the economic cycle and 2) diversification IS NOT risk management. More on this topic later.

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