21-07-2025
4 Signs You Have Too Much Investing Risk And How To Fix It
A contrarian strategy can limit your exposure to the scenario no investor wants: a major downturn ... More when you're heavily concentrated in high-risk positions.
Investors have more risk in their portfolios right now, according to monthly survey by Bank of America, as quoted in Investment News. Higher allocations to U.S. and European stocks, including volatile technology stocks, are creating the riskiest portfolios since 2001.
Admittedly, 2025 is a difficult time not to bet heavily on growth stocks. After all, AI chipmaker Nvidia recently became the world's most valuable company. And, the S&P 500 and the tech-heavy Nasdaq Composite are fresh off new highs. The investing climate is largely rewarding risk—and most investors are happy to accept the gains.
In these millionaire-making times, the approach of Omaha's Oracle Warren Buffett comes to mind: "we simply attempt to be fearful when others are greedy and to be greedy when others are fearful." This contrarian strategy can limit your exposure to a major downturn when you're heavily concentrated in high-risk positions.
4 Signs Your Portfolio Is Too Risky
Risk is a funny thing for investors. The thresholds for too much or too little risk are mostly set by your personality and preferences. You may tolerate a 90% allocation to stocks, while your neighbor resists having a single dollar in equities. This makes it tough to define a risk test that applies to everyone.
Even so, there are signs you may be stretching the boundaries of your risk tolerance. Four are below.
How To De-Risk Your Portfolio Safely
Sticking to a conservative investment approach long-term can produce better results than deviating from an aggressive strategy. This is why aligning your portfolio risk with your tolerance is so important. If you need to de-risk your portfolio, do it by taking profits, changing the allocation on new investments or pausing your dividend re-investments.
Investment Risk FAQs
Here are the answers to the questions retail investors are asking about investing risk.
Yes, investing has risk. Any invest-able asset with the potential to increase in value also has the potential to decline. You can manage the risk by holding a diverse mix of investment types for long periods.
Your portfolio should be only as risky as you can handle. Conventional wisdom says you should take on more risk when you are younger and less as you age, but this rule isn't universally appropriate. The right risk level for you is conservative enough that you will stick to your strategy even in the worst of times.
Too much risk makes for a volatile portfolio. Big value declines can work against your long-term returns, because it takes a larger gain to make up the lost ground. Say you have a $100,000 portfolio that dips by 25%. Now it's worth $75,000. To get back to $100,000, you need a 33.3% increase—since you are starting from a lower base.
