Financial Advice, Planning and Guidance.

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The second best time is today.

Reaching Your Financial Goals

Our Consultative Approach is a time-proven method that focuses on your needs, your goals and your priorities. Isn’t that a better idea?
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Financial Advice and Strategies

Active money management is more than just a good idea: it is a responsibility. Are we the right partner for your retirement goals?Learn More

Planning. It's Really Not So Complicated

When you finally do figure out what to do with the rest of your life…you’ll probably want the rest of your life to start immediately. How about today?Learn More

Guidance: In Every Client Relationship.

At Denk Strategic Wealth Partners, our insight offers the ‘How’ and the ‘Where’…but only after your vision tells us the ‘Why’.Learn More

Weekly eLetter 8/16/2019 — Managing Risk: What Does That Mean?

At Denk Strategic Wealth Partners (DSWP), we strive to manage risk. There is no investing without risk, so it must be managed. Managing the risks of the markets is “mission critical” as we believe no investor would — or should — choose to intentionally remain fully invested in the stock market during severe bear market declines.

But before embracing a risk managed approach in one’s portfolio, it is important to recognize that risk management strategies are only a part of a properly diversified portfolio. In other words, risk management is but one investing methodology and we believe that a portfolio should be made up of multiple methodologies, strategies, and managers.

It is also important to have the proper expectations when adding risk management strategies to a portfolio. Below are our views on the subject:

The most common expectation of a risk managed approach is to be invested in stocks during bull market environments and then move to cash during those nasty bear market cycles.

While nice in theory, in reality, such a goal is virtually impossible to implement on a consistent basis. Every bull market is different. And the next bear market usually doesn’t act anything like the last one. Therefore, one must understand that the overriding goal of a risk managed approach is to try and capture as much of the gains during bull cycles as possible and then to lose as little as possible when the bears come to call.

At DSWP, we strive to stay in sync with the market’s primary trend. It is important to understand that we won’t get every move perfect. We won’t dodge “corrections” during bull market trends. We will make mistakes along the way. In short, our goal is to get it mostly right, most of the time.

What Risk Management CAN Do:

  • Reduce exposure to market risk during severely negative environments
  • Strive to “lose the least amount possible” during bear markets
  • Get it “mostly right, most of the time” during really big, really important moves

What Risk Management CANNOT Do:

  • Sell at the top and buy at the bottom of market cycle (this is a fool’s errand)
  • Protect against ALL losses during negative markets
  • Avoid all/every bear market declines
  • Protect against losses during normal market “corrections”

In reality, over a span of five bear market cycles, we probably expect to “get it right” and “lose less” three or four times. Thus, it is important to recognize that we won’t get it right every single time. However, potentially avoiding significant losses 3 times out of 5 certainly beats the alternative.

Our belief is that with the proper expectations, risk management can add significant value to a portfolio – especially during negative market environments.

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