In our view, the best way to manage risk is to buy assets at a discount to their intrinsic value. The stock market gives you opportunity to do this every day. Other risk management strategies include-
- Spreading investments across diversified businesses
- Investment of a portion of the portfolio in special situations where returns have lesser correlation to market movements.
- Applying hedging strategies for risk management
- Investing not more that 15% of the portfolio in a single stock and not more than 25% in a single industry
Above all, a combination of our experience, analysis and judgement is the biggest risk management tool.