Michael Dieschbourg of Federated Investors discusses strategies for managing risk in this video. Having a managed risk strategy is a way for investors to stay in the market during tough times, according to Mr. Dieschbourg. Most investors have a difficult time losing money and may feel the pain of losses 3-4 times as intensely as they feel the pleasure of gains. Mr. Dieschbourg says that most investors don’t want to invest after they’ve lost money, and they may stay on the sidelines too long. But if you stay in the market longer, your money will compound over a longer period of time, and that’s key to achieving one’s financial objectives.
Speaking of which, Mr. Dieschbourg has an interesting take on the “problem” that there aren’t enough good benchmarks for alternative strategies such as managed risk: In Dieschbourg’s view, the only “benchmark” that matters is the investment objective of the investor pursuing the strategy! That’s what’s important, not the S&P 500.