Manage risks to ensure you follow Rule No. 1 of Investing ...Never lose money!
Your portfolio will have some or all of these 7 Risks
CR
4. Market Cap Risk
While some smaller cap companies have potential of high returns, most come with high risks. Many have weak business models and are badly hit by economic or business downturns, and can erode your wealth!
AA
1. Asset Allocation Risk
Putting all or most of your investable surplus in the equity basket exposes you to high risk and putting too much in safe, fixed-income asset reduces your returns drastically.
BR
5. Business Risk
Companies with poor fundamentals and weak business models can not deliver consistent and sustainable profitable growth.
SR
2. Sector Exposure
Companies in the same sector are likely to be impacted by the same economic factors. Large exposure to a single sector, or correlated sectors, could result in a drastic fall in your portfolio market value.
VR
6. Valuation Risk
If over-priced stocks form a large portion of your portfolio, a price-correction will reduce your portfolio value substantially.
SE
3. Stock Exposure
A stock is exposed to several company-specific risks, (business, balance sheet, valuation or people risk.) A 20% drop in a stock comprising 20% of your portfolio reduces your absolute returns by 4%.
LR
7. Liquidity Risk
Low-trading Assets have very few buyers. So, one cannot sell it, when needed without compromising on prices.
...Some risks help you earn good risk-adjusted returns, manage them. Eliminate the rest!
Risk Analysis is done on all your portfolios combined.
The top part of the page shows key metrics. Check tooltips to know more.
Your portfolio is analysed for 7 Risks. Here you can see details & actions for Sector Exposure. This portfolio is over-exposed to the BFSI sector. So, adding another Bank stock to this portfolio would be an incorrect decision.
Here are the cards of BFSI stocks in this portfolio. A stock-card also shows other risks that a stock carries. To reduce the Stock exposure risk, some of these stocks need to be sold.
At the bottom of each risk, you can see the explanation about each risk.
Your portfolio has a downside potential of ₹ -92 K (9.6% of Portfolio)
Your equity portfolio is over-exposed to BFSI sector.
BFSI
Exposure: Current: 27.78% After Action: 0%
In this sector 3 stocks have Business Risk,4 stocks have Valuation Risk.
SBI
CMP: 272 | ₹69 K (7.3% of Portfolio)
1 Risk
SRSector Exposure
Sell out of 255 Shares
ICICI Bank
CMP: 292 | ₹53 K (5.5% of Portfolio)
1 Risk
SRSector Exposure
Sell out of 180 Shares
HDFC Bank
CMP: 1788 | ₹41 K (4.3% of Portfolio)
2 Risks
SRSector Exposure
VRValuation Risk
Sell out of 23 Shares
Max Financial
CMP: 600 | ₹30 K (3.1% of Portfolio)
2 Risks
SRSector Exposure
BRBusiness Risk
Sell out of 50 Shares
Axis Bank
CMP: 493 | ₹25 K (2.6% of Portfolio)
1 Risk
SRSector Exposure
Sell out of 50 Shares
Federal Bank
CMP: 111 | ₹12 K (1.3% of Portfolio)
2 Risks
SRSector Exposure
VRValuation Risk
Sell out of 109 Shares
ICICI Prudential
CMP: 438 | ₹11 K (1.1% of Portfolio)
2 Risks
SRSector Exposure
BRBusiness Risk
Sell out of 25 Shares
HDFC
CMP: 1778 | ₹11 K (1.1% of Portfolio)
2 Risks
SRSector Exposure
VRValuation Risk
Sell out of 6 Shares
Max India
CMP: 138 | ₹8 K (0.8% of Portfolio)
2 Risks
SRSector Exposure
BRBusiness Risk
Sell out of 55 Shares
Shriram Trans. Fin
CMP: 1054 | ₹5 K (0.6% of Portfolio)
1 Risk
SRSector Exposure
Sell out of 5 Shares
Chola. Invest & Fin.
CMP: 1157 | ₹1 K (0.1% of Portfolio)
2 Risks
SRSector Exposure
VRValuation Risk
Sell out of 1 Shares
FAQs: Sector Exposure Risk
When you invest a significant portion of your portfolio, typically more than 25%, in a single sector, or in
multiple sectors that are highly correlated, your portfolio is subject to sector exposure risk.
Companies in the same sector are likely to be impacted by the same economic factors. Or sometimes
the same economic factor adversely impacts multiple sectors. For example a sharp increase in interest
rates is likely to have a negative effect on both banking and infrastructure sectors. The market reacts
and prices fall, sometimes sharply. Therefore a large exposure to a single sector, or correlated
sectors, could result in a drastic fall in your portfolio market value.
Sector exposure may not always be a bad thing. Taking this risk is justified only when
compensated with good returns. For this you must be sure that the sector/companies will bounce
back in the time frame you are willing to remain invested and that the current prices are very attractive.
It is best to consult a fiduciary investment advisor before chasing higher returns at the cost of sector exposure risk.
