{"id":14859,"date":"2023-03-28T13:54:18","date_gmt":"2023-03-28T18:54:18","guid":{"rendered":"https:\/\/johnsonwim.com\/?p=14859"},"modified":"2023-03-28T13:54:18","modified_gmt":"2023-03-28T18:54:18","slug":"investing-strategies-balancing-risk-and-return","status":"publish","type":"post","link":"https:\/\/johnsonwim.com\/investing-strategies-balancing-risk-and-return","title":{"rendered":"Investing Strategies: Balancing Risk and Return"},"content":{"rendered":"
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The key to building the right retirement portfolio is to balance risk and rewards. <\/strong><\/p>\n

Planning for retirement is vital for helping to secure your financial future, and investing plays a critical role in building your nest egg. But did you know that it’s equally important to balance the risks and returns of your investments for financial success?<\/p>\n

Undertaking the balancing act of managing risk and reward in investing means knowing the basics, understanding the role of risk in a healthy portfolio, and better incorporating risk into your portfolio in a way that makes the prospective reward worth the cost.<\/p>\n

Below, we will explore some effective investment strategies that can help retirees to balance the risk and return of their investments. So, whether you are a new retiree or planning for your retirement, here’s what you need to know.<\/p>\n

What Does Risk and Reward Mean for Investing?<\/h4>\n

The risk-reward ratio is a mathematical calculation used by investors to measure the expected gains of a given investment against the risk of loss.\u00a0<\/span><\/span><\/p>\n

A lower risk\/return ratio is often preferable as it signals less risk for an equivalent potential gain. However, in general, the greater the risk, the greater the expected return demanded.<\/p>\n

To calculate risk\/reward ratio, use this formula:<\/p>\n

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Potential loss \/ potential profit = risk\/reward ratio<\/strong><\/p>\n<\/blockquote>\n

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Divide the amount you could profit (that’s the reward) by the amount you stand to lose (that’s the risk). So if you bought a stock for $100 and planned to sell it when it hits $200, the net profit would be $100.<\/span><\/span><\/p>\n

Please note: Some investors use reward\/risk ratio, which reverses the above formula. However, for reward\/risk ratios, higher numbers are better for investors.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

Balancing Your Investment Strategy<\/h4>\n

A balanced investment strategy combines asset classes in a portfolio in an attempt to help balance risk and return. Typically, balanced portfolios are divided between stocks and bonds, either equally or with a slight tilt, such as 60% in stocks and 40% in bonds. Balanced portfolios may also maintain a small cash or money market component for liquidity purposes.<\/p>\n

There are many different ways to put together a portfolio, depending on the preferences and risk tolerance of the investor.<\/p>\n

Diversify Your Portfolio<\/b><\/h4>\n
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Diversification<\/a> is one of the most effective ways to help balance risk and return in your investment portfolio. By investing in a variety of assets, you can help reduce the risk of investments affecting your overall portfolio. Some examples of assets you can invest in are:<\/p>\n