Portfolio Risk Monitoring & Optimization

Constant Portfolio Protection Made Easy

Want to feel your portfolio is protected as the market goes up & down?
The SmartStops Portfolio Risk Monitoring feature enables investors to easily monitor a portfolio of stocks and ETFs so their risk exposure can be constantly analyzed for improved downside protection.  Our system watches over your portfolio in real time to keep you updated daily giving you peace of mind.  Now you will know when to sell, hedge or rotate your investments saving you money and generating higher returns.

Risk does not remain constant through time.  As Howard Marks, author of The Most Important Thing, wrote:

“Great investing requires both generating returns and controlling risk. And recognizing risk is an absolute prerequisite for controlling it.”

It’s important to recognize that principles of diversification and allocation are no longer sufficient in today’s globalized markets. Correlations have become ineffective.  New methods to monitor risk were needed which is why SmartStops was created.  Learn more about Why We’re Better than other methods available.

What does the Daily SmartStops Risk Monitoring Report provide?

What Steps should I consider taking if I see my symbol at Risk?

Selling, hedging, holding pat or buying more can all be legitimate results of a thoughtful analysis of your position.  The key is – Review your position.  When risk levels change, the important thing is to make a timely and informed decision.

 Sell the position and go to cash

Investors often become emotionally attached to their positions.  They fall in love with their winners, and they hesitate to sell their losers in hopes of making it back to even.  Don’t fall into this trap.  Learn to let go of your losers.

Remember, selling is only the first step to reinvesting.  Taking a loss is easier when you think of it as a swap—in which you replace a loser with a new investment in a similar (but not identical) asset—rather than a sale.  That makes taking action easier, as you don’t have to face what may have been some bad timing when you purchased.

And if you’ve got profits – take them!  Even if you sell just a portion of the position.  Though there are many studies showing the “disposition effect” and that investors sell their winners too soon, statistics also show that the average downturn or correction can be 20% and the drop in price for a market leader, 72% (source: IBD). So if your winner has now taken a turn down , as the saying goes –

“You can’t go broke by taking a profit.” 

 Maximize your return per day in the market for where your money is invested.

Hedge your position

Instead of selling your long position, you might consider using options or ETFs to hedge your position.  Buying an out of the money put on your long position is like purchasing downside insurance.  There is a cost, but it the storm hits, it will be worth it.  SmartStops risk states help investors optimize when to put protection on and when to take it off.  You can learn more about options from your broker.

Employ Sector Rotation

One popular and effective risk management method is sector rotation, or moving from higher risk overbought sectors to lower risk underbought ones.  The trick is to know, when to make the move as well as the sector your position is in.  The SmartStops Market Risk Barometer can help.  This risk tool provides a history of risk ratio levels for various market sectors including basic materials, consumer goods, consumer services, energy, financials, healthcare, industrials, technology, telecommunication and utilities.  Learn More about our Market Risk Barometer.

Rebalance your portfolio

Is it time to rebalance your portfolio by reducing your exposure to some of your recent winners that have grown to represent too large a percentage of your portfolio?  The SmartStops Market Risk Barometer and Stock Risk State reporting can help you pick sectors and equities that are exhibiting favorable risk states.  Start your search for new positions by analyzing the risk they represent.  Then ensure you are purchasing the right number of shares to reflect the risk using our How Much to Buy Calculator.

Keep in mind that portfolio diversification has come under fire in recent years, as the 2008 market crash showed just what can happen when every sector is hit by the same negative factors . Investing guru’s like Warren Buffet and Howard Marks condemn diversification. So don’t be afraid to also investigate a more concentrated portfolio approach.  Especially now that you have SmartStops available to help protect those positions.  Learn how.