Risk management

Downside management toolkit

Helping with downside protection during market volatility.

How do you get downside protection?

This toolkit can help with your investment risk management. We’ll keep you informed of the latest market events, share how we've been managing downside risk in our portfolios, and equip you with important truths to hold onto during unavoidable market volatility.

Insights for times of market volatility

What is risk management?

When it comes to investing, risk management is the active mitigation of uncertainty that surrounds all investment opportunities. Investing is inherently risky. At Russell Investments, we do not seek to avoid risk, but rather work to ensure that the right risks are taken, with the highest likelihood of compensation. We work to ensure exposure to uncompensated risk is minimized.

Investing in volatile times

At Russell Investments, we help investors manage downside risk in three ways: by diversifying sources of returns, by using a robust dynamic asset allocation process to guide tactical positioning, and by seeking effective implementation capabilities. We have been anticipating a low-return, high-volatility environment for the last 2-3 years. Accordingly, we have been dynamically adjusting our portfolio positioning to manage downside risk.

Why uncomfortable investing may be the way forward

The ability to withstand the next market correction may require making investment decisions that are uncomfortable and go against the grain.

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The search for returns: the low-return imperative

We believe the search for returns is not going to get any easier against a backdrop of high U.S. equity prices, narrow credit spreads and low bond yields. When expected future market returns are likely to be lower than the required rate of return, we believe an investor cannot afford to ignore any investment strategy that may offer incremental return, take on risks they do not expect to get paid for or disregard implementation efficiency.

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Why downside protection may matter more than upside growth

The global macroeconomics and geopolitical outlook remains uncertain, suggesting that an environment of low rate, low growth, and high valuations may linger. Against this backdrop, preserving capital may be more important than seeking the growth of capital, because, in the investing world, losing less means requiring less to bounce back. 

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How we position our portfolios to help against downside risk

Complacency has no place in portfolio management. Once a portfolio or fund is built, it needs to be dynamically managed to not only take advantage of potential upside opportunities, but avoid as much downside as possible. At Russell Investments, our global portfolio managers direct multi-asset portfolios in real-time, all the time. 

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Multi-asset investing: the importance of seeking to manage the downside

Big losses are hard to recover from. That’s why a multi-asset approach that also emphasizes managing downside risk – the range of techniques designed to reduce the probability and magnitude of losses in a portfolio – is so valuable.  

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The search for returns in a low-return environment

We all know that successful investing is hard, but does it seem to be getting harder? For many investors the answer is “yes” for two primary reasons. The first is because many investors need fairly high nominal returns to achieve the investment outcomes they seek—and the second because market returns have lagged long-term averages over the last decade.  

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Important market volatility truths

Why the things in-between matter: Diversifying beyond U.S. stocks and bonds

During times of market volatility, we believe that exposure to in-between asset classes may be of increasing value. A look at their performance during the recent market downturn suggests as much.

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Why a dynamic multi-asset approach matters during volatile markets

We believe nimbleness and dynamism is most beneficial during periods of market dislocation, where the elapsed time between idea and implementation is critical. As the February 5 sell-off demonstrated, markets don't work on quarterly cycles.

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The impact of staying invested during market turmoil

Staying the course during market volatility is often difficult for many investors. Some choose to move to cash investments, while others try to time the market. Unfortunately, these investors are often buying high and selling low—and miss the rallies that follow the challenging periods.

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Using risk tolerance to make clear decisions

One of the factors to consider when constructing an investment portfolio is how you balance the potential for risk with reward. It’s just as important to be aware of how your portfolio is constructed to not lose money as it is to be aware of how it makes money.

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Market timing amid volatility - tricky as ever

Correctly timing when to get out of – and back into – the market is tricky. Get out right after a ‘worst’ day, and one might not get back in soon enough to catch a ‘best’ day. Such mistiming can have a significant impact on potential portfolio returns.

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