Managing risk: stress-testing investment portfolios

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Risk is always a hot topic and Quintin Rayer overviews the stress testing of investment portfolios.

Assessing portfolio risk in a meaningful way can be challenging. Extreme market moves can negatively impact portfolios in ways which may not be captured by conventional risk measures. In addition, a breakdown in diversification may mean that portfolio values are not protected. With guidance, you may be able to determine the impact on your portfolios and arrange for appropriate restructuring to limit the downside.

This article forms a helpful introduction to IFAs less familiar with portfolio stress-testing and forms the first in the series of articles on this topic. The following articles can be found here: More detailed look at portfolio Stress-testing and Different types of portfolio Stress-testing.

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Q G Rayer (2017), Managing risk: stress-testing investment portfolios, DISCUS, available at, 2 pages, 26 January 2017.

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