Portfolio Risk – Do you know yours?

martinis and your money

Portfolio Risk

On today’s podcast, I am back with another episode in the investing series and today we are talking about portfolio risk. I think most of us make investment decisions based on stocks or investments we like or others have told us about and put together our portfolio without thinking about the risks in our portfolio.

Risk management is something that professional portfolio managers pay attention to, yet I think many individuals give it little thought. The biggest reason why people avoid it is because they don’t understand the measurements of risk or how to apply them to their own funds.

I think this is another great investment topic and I’m thankful to my friends Wendy and Eric at DIY Fund for joining me again to talk about it. Not to mention the fact that their site gives you the very tools you need to assess your own portfolio risk.

Shot of the Day

Sex On The Beach

Podcast Notes:

  • Portfolio risk is one of the most important investing topics to understand.
  • If you are not getting paid for the risk you are paying for, you are not performing properly.
  • People often don’t realize what is risky and what’s not risky.
  • The riskier assets are the ones that will move up and down (have more volatility) eratically.
  • Generally speaking, stocks are more risky and bonds are less.
  • Volatility is a statistical measure of the movement of a stock.
  • Too many people focus on the upside of risk, but the greatest investors focus on the downside risk, which is key.
  • Having a mix of risky and less risky asset types will help protect you from losing more than you should.
  • If you are going to put more risk in your portfolio, you should get the returns from that.
  • The Sharpe Ratio is an equation to help you calculate the risk in your portfolio.
  • Understanding the risk component of your returns helps you adjust from year to year.

Do you look at the risks in your investment portfolio? 

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Shannon is a financial planner who left a “traditional” financial services firm to start her own company, The Financial Gym, because she felt traditional financial services firms did not have the tools or resources to help people in their 20s and 30s who are starting out and trying to build assets while also managing debt. She realized that the key to long-term personal financial success is a commitment to financial fitness and making smart financial choices. Through her blog, Financially Blonde, her book, Train Your Way To Financial Fitness, her podcast, Martinis and Your Money and The Financial Gym, Shannon is committed to making financial fitness fun, easy and accessible for everyone.


  1. We mostly invest in index funds. The risk is obviously there, but we are diversified to mitigate some of it. We have quite a long timeline until we’ll need our retirement funds, so I’m not worried about it now!

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