Risk Management

Balancing required risk with your comfort level to achieve long-term goals

Risk is necessary for growth

We have yet to hear of an investment firm that admits taking risks. At Cortland, we can tell you specifically the multiple ways we diminish risk in investments.

First, we spend enormous amounts of time analyzing the two or three new investments we make each year. If one hasn’t done this in-depth research at the onset, how does one know if he or she is taking on a risk or not?

Secondly, most Wall Street analysts will look only at the earnings estimates and/or P/E ratios as risk measurements. In addition to these elements , Cortland will examine product obsolescence vulnerabilities, EPA liabilities, and any other liability to capital loss, such as lawsuits.

Cortland will also look at protective attributes such as branding, superior customer experience, market dominance, and niche business advantages.

Determining the right level of risk

The process of determining what level of risk you’re comfortable with covers three main areas:

Risk Tolerance

This refers to your willingness or comfort level with taking risk. Gauging risk tolerance and your potential behavior is important because it’s unlikely you’ll reach your long-term goals if you abandon your strategy due to short-term market volatility. By finding the right balance between the risk you’re willing to accept and the returns you anticipate receiving, you’ll be in a better position to stick with your investment strategy regardless of what the market is doing.

Risk Capacity 

This considers your ability to handle risk. Your investment time horizon is often one of the biggest factors in determining your risk capacity. For example, if you’re younger and saving for retirement, you have a long time to make up for losses and could reasonably handle more volatility. However, if you’re retired, your ability to handle volatility will likely be less.

Required Risk 

This refers to the level of risk that is necessary to achieve your investment goals. As you discuss your goals with your Cortland financial advisor, together you can determine the asset allocation necessary to help achieve those goals, as well as the associated risk profile of each asset allocation.