Fritz Mowery is president of Mowery Capital Management, a Dallas-based, fee-only investment advisory firm. Fritz Mowery built his firm to adopt fundamental research in combination with technical and quantitative implementation as a strategy for managing investment risks.
Risk management is the process of identifying, analyzing, and mitigating uncertainties that come with investments. Investors expect to yield returns over time, but each investment has price fluctuations that investors cannot control. The consequence of inadequate risk management is the loss of funds. Before investing, investors should understand the business model of their company of interest and how to mitigate the risks in such an investment.
Every investor must develop a strategy. An essential part of investment risk management is understanding the purpose of the investment. Short-term and long-term investments have different risk-management routes. Diversifying investments helps investors spread their risk across platforms and reduces the probability of losing funds from one poor investment.
Investors must understand business correlation, the process of identifying businesses operating within the same field, and they must invest in companies that are oppositely or negatively correlated. Investing a specific amount of money monthly, otherwise known as dollar-cost averaging, and investing over time are other strategies that may help investors manage risks.
