CANNAINVESTOR Magazine January / February 2017 - Page 64


Retail Investor's Perspective

What is the best strategy for the prepared Retail Investor? Start by re-reading all past articles written by several authors appearing in CANNAINVESTOR Magazine while realizing that strategies will be different for each Retail Investor. According to modern investment theory, a well diversified portfolio is essential. Diversification is a foundation to many successful portfolios and is almost always unique to every investor because two investors that hold identical investments will still have different risk tolerances, portfolio weightings, time horizons, etc. The concept of Diversification is simple: minimize risk while maintaining or exceeding the target ROI.


A stock portfolio is subject to System Risk and Unsystemic Risk. Systemic Risk (market risk/un-diversifiable risk) are risks that all investors face and are not specific to any one company, segment, and so forth. A good example of Systemic Risk is the effect that changes in interest rates have on the stock market. Other examples may include acts of terror, war, natural disasters, political turmoil (eg: BREXIT or perhaps a decision/ruling that impacts the industry), and so forth. A stock’s volatility is a good measure of how the stock reacts to various systemic risk shocks. System Risk may be mitigated through hedging.