Risk Management Checklist for Investors

Risk Management Checklist for Investors

• Limit any single stock to 5–10% of portfolio

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  Concentration in one name = company-specific risk. Even great companies can fail.
• Diversify across sectors and geographies

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  Don't be 80% tech or 100% US. Spreading reduces volatility.
• Hold bonds or cash for goals under 5 years

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  Stocks can drop 30–50%. Short horizon = lower risk assets.
• Avoid margin or leverage unless you fully understand it

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  Margin calls can force sales at worst times. Most investors don't need it.
• Have an investment policy statement (IPS)

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  Written rules: allocation, rebalancing, what you won't do. Review when emotional.
• Automate contributions to reduce emotional decisions

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  DCA and auto-invest. Removes timing temptation.
• Don't check portfolio daily—weekly or monthly is enough

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  Noise drives bad decisions. Long-term investors need less frequency.
• Know your max drawdown tolerance before it happens

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  Can you handle 30% drop? 50%? Adjust allocation if not.
• Consider tail-risk hedges only if you understand them

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  Put options, gold, etc. Usually unnecessary for balanced portfolios.
• Review risk annually or after major life events

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  Marriage, kids, job change = different risk capacity.