Investment Risk Management<Investment Risk Management

Morgan Wilshire Securities believes that the greatest risk is not taking one! Strategic investment risks in the markets, over the long term, have yielded exceptional results.

There is no guarantee that such results will be the case in the future. Each security has its own degree of risk, whether resulting from the performance (or lack thereof) of its operations, downturns in its particular industry, or from outside market forces (e.g., the enormous swing in so-called internet stocks) due to non-company specific actions, such as wild speculation.

Types of Investment Risk

Most investment risk is described as either systematic or non-systematic. While those terms may seem intimidating, what they refer to is actually fairly straightforward:

Systematic Risk

This is also known as "market risk" and refers to factors that can affect the overall economy or securities markets. It also affects all companies, regardless of financial condition, management, capital structure, and other domestic and international factors.

Types of Investment RiskSome common systematic risks are as follows:

  • Interest-rate risk
  • Inflation risk
  • Currency risk
  • Liquidity risk
  • Sociopolitical risk


One way of defending against systematic risk is asset allocation, which is to develop a portfolio that includes investments that have the potential to react differently to the same economic factors.

Non-Systematic Risk

This type of risk affects a much smaller number of companies or investments and is associated with investing in a particular product, company, or industry sector.

Some common non-systematic risks are as follows:

  • Management or company risk
  • Credit or default risk


One way to manage non-systematic risk would be to spread your investment dollars around and diversify your portfolio holdings within each major asset. These might include: stocks, bonds, and cash from owning individual securities or mutual funds.

helping-manage-riskHelping You Manage Risk

Wilshire Securities, Inc. is available to help you sort through the information about each investment and assist you in determining what may be appropriate for your specific objectives, given your stated risk tolerance. While we generally recommend and follow securities traded on the New York Stock Exchange and on NASDAQ's National Market System, on occasion our clients may choose to invest in securities traded on NASDAQ's Small Capital Market System and/or use a "short sale" strategy. These types of securities and investment strategies are appropriate for risk tolerant investors only.Please consult your Morgan Wilshire representative to better understand the potential risks and rewards of any investment.