Question

	The trade off between risk and return Please discuss the importance of how you can manage your portfolio's risk in the current environment (FED policies, global political and economic uncertainty, COVID-19...). Should I stay in cash? bonds?? or take more risk in equities???

Answer 1

There is too much of uncertainty in the current global environment which has been surrounded by coronavirus and it is leading to the economies being shutdown and no movements between countries and it has led to a complete economic Chaos and a lot of unemployment

In such scenarios, when there is a lot of uncertainty and investors should be looking to invest into those portfolios who are defensive in nature and he should be taking exposures into those assets who are having less volatility in respect to overall uncertainty in the market.

I would be looking to invest into a large proportion of Bond and also looking into those sectors of the economy which are less correlated in movement of the overall market like pharmaceutical industries and the retail industry, so I would be having exposure in all those assets which will be beneficial in the maximization of the overall return with minimization of risk.

The exposures in different asset classes is always based upon the tolerance and risk appetite of various investor so if one is highly aggressive then he would be allocating more of the resources to the overall equity which will be helpful in getting high rate of return in future.

If one is highly conservative and rational in nature, then he will be refraining from taking risk and he would be allocating more of the assets to the bonds and less volatile equities.