With the collapse of SVB, how safe are your investments?

With the collapse of SVB, how safe are your investments?

Seems like everyone is asking “What caused the collapse of Silicon Valley Bank and how could it have been prevented?”

Both are good questions and there are plenty of analysts talking about it.

But for the average investor, it more importantly highlights the question of risk. “How do I know if I’m positioned correctly? How do I minimize risk? How can I protect myself?”

Whether you’re a seasoned investor or a novice saver, remember that there’s always some element of risk. Can you have a completely risk free portfolio? I suppose you could if you put 100% of your money in Canada T-Bills but depending on your goals, that just may not be the most appropriate move.

So what do I suggest when someone asks me how to balance risk vs. return? There are a few key things to think about:

Understand investment risk and your personal risk tolerance: Begin by understanding the real investment risk. There are speculative, high risk investments and there are conservative, low risk ones. It’s important to know which is which. And if you don’t understand the risk, and aren’t comfortable with it, either find out more or don’t do it.

What’s your time horizon: Are you investing for next year, or is it for retirement in 20 years? This makes a huge difference in both the type, and the mix of investments you should hold.

Build a Portfolio: Don’t just buy investments randomly. The latest hot stock or ETF could be next year’s dog. Instead, build a portfolio. Make sure that you have a mix of investments that are appropriate to you. The combination of cash, fixed income and equity that’s right for the guy you were talking to at a party, isn’t necessarily right for you. So stop comparing.

Be Disciplined: Ensure your portfolio is well-diversified (by geography (Canada, US, International etc.), size (small or large companies), sector (tech, healthcare, financials etc.) and style (growth, value, momentum); invest for the long-term; don’t try to time the market; and don’t forget to rebalance.

Look, no strategy can eliminate all types of investment risk. But by following a prudent discipline that aligns with your goals and comfort level, you’ll be able to find the balance between risk and return that’s right for you.

Mark Shimkovitz is a financial advisor with Raymond James Ltd. Information provided is not a solicitation and although obtained from sources considered reliable, is not guaranteed. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The view and opinions contained in the article are those of the author, not Raymond James Ltd. Raymond James Ltd. member of Canadian Investor Protection Fund.