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Not only does JPMorgan’s trading debacle remind us that the big banks are still capable of making mistakes that could potentially do damage to all of our portfolios, it also provides another takeaway for smaller investors: it’s not always easy to distinguish between where measured risk taking stops and some form of gambling begins.
This week’s Your Money column looks at different approaches to managing investment risk, from avoiding the markets altogether to insuring the risk away. Many of us do something in the middle, and keep a diversified portfolio of investments.
But whatever strategy you take, it’s probably going to involve some element of risk. It’s just a matter of figuring out what you’re willing to give up, and how you’ll deal with the consequences in a worst case.
What sort of approach do you take to limiting the risk in your investment portfolio? And have you ever tweaked your approach because you realized you were taking too much or too little risk?
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