All investments carry risk; this is an irrefutable fact. Even money held on deposit at banks that have traditionally been regarded as “bomb-proof” harbor a small element of risk. Of course, different types of investment have varying degrees of risk but, wherever possible, it is important that such risk is carefully identified and mitigated.
Notwithstanding that Monex Financial ultimate aim is to secure optimal returns based on our client’s risk considerations, the preservation of their initial capital is central to our investment management principles. We allocate significant resources each year to improving and developing our risk management practices to ensure they are able to deal with corresponding changes within the financial marketplace.
Our experienced risk management team makes every effort to deploy and sustain superior practices and performance by making use of innovative research tools, premium quality systems and the conduct of careful diligence on assets, products and providers available in the marketplace.
Monex Financial main risk management strategy revolves around our asset allocation policy. This strategy determines a combination of investments which are most likely and capable of meeting a client’s goals, after factoring their risk attitude and investment time horizon carefully into the equation.
For the most part, many investment schemes can be complicated and their machinations tend to be beyond the understanding of most laymen. Most investors are unlikely to have the time needed to familiarize themselves with the intricacies of markets and the ways in which they work.
Monex Financial leverages years of experience to bring the many opportunities in today’s markets to the investor in plain language. This should not be regarded as an attempt to “dumb down” critical information but rather as an indication of the depth of our understanding of our business.
By leaving no stone unturned in our assessment of the investments we recommend to clients, we are able to identify risks that may not be apparent at first glance. We consider it our solemn duty to make sure that our clients are not investing in excessively speculative products or securities. We conduct due diligence into these products and pay particular attention to things like mutual fund charges not only before making recommendations but also on an ongoing basis to ensure that charges don’t escalate after funds have been invested.
Put simply, the more investment choices there are in the marketplace, the greater the need for investigations into the product its provider and the manner in which they conduct their business.
We insist on appropriate oversight of mutual funds and ETFs. We insist that there is a minimum of deviation from the original prospectus ensuring the fund cannot buy assets outside the limits of its purview. The relevance and the protection afforded by our due diligence practices aims to offer clients the assurance they need in today’s complex investment arena and is borne of deep understanding of the financial markets.
Assessment of Risk
Because investment in most assets can offer unpredictable results, it stands to reason that they must exhibit varying degrees of risk. Consequently, it is essential that we first have a clear picture of our client’s risk attitude and return objectives if we are to construct a portfolio most likely to achieve the desired results.
We measure risk in terms of the volatility of investment returns and use a statistical tool colloquially referred to as “standard deviation” to quantify it. Standard deviation can be applied to a single holding or to an entire portfolio of holdings. At the portfolio level, we use careful diversification to mitigate overall risk.
When creating bespoke asset allocation models, our risk management practices require that we group securities that share specific qualities into asset classes; large-cap equities and long-dated bonds, for example. We then make certain assumptions for each asset class; these might include approximations of the returns we can reasonably expect, inherent risk and any correlation between the various asset classes.
Our findings are then processed with information collected from the results of our client assessment in order to provide the investor with an optimal asset allocation investment portfolio.
At Monex Financial, we believe that asset allocation represents an orderly and methodical means of investing since our clients are not unduly exposed to the vagaries of the market. Rather, their portfolios adhere to the agreed asset allocation recommendations until such time as an amended policy is warranted, whether owing to a change in the client’s risk attitude, the overall market environment or personal requirements and/or goals.