Preservation & Risk Management

Your investments are valuable. Learn how to protect them here.

Investor Protection

Investment fraud in Canada is real, knowledge is power.

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Scams & Fraud

Beware of scams and fraud. Here are some MoneySmart Manitoba tips to protect yourself.

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Insurance

Insurance helps protect you and your loved ones.

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Wills and Estate Planning

An estate plan can include a will, decisions on power of attorney, a health care directive, and legacy choices.

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When it comes to your finances, what can you do to protect your hard-earned money from investment fraudsters? How can you protect your greatest asset, your income, in the event of death or disability?

Risk mitigation, sometimes called risk management, means taking steps to reduce adverse effects. Protecting yourself, loved ones and others you wish to help, is a common goal of financial risk management.

This section explains how you can preserve your capital and minimize the risks that could potentially erode what you have. It illustrates four strategies you can use to manage your financial risks:  Acceptance, Avoidance, Limitation and Transference.

Using investments as an example, let’s see what employing these strategies might look like:

  • Risk Acceptance: This is an approach that puts the risk into an appropriate time horizon, knowledge and comfort zone. A twenty-year-old investor understands the stock market may be more volatile than the bond market.  They are willing to accept this risk knowing they have a long time-horizon to recoup any losses they might experience through the ups and downs of market fluctuations. This strategy is a common choice when the benefits, such as saving for retirement, outweigh the cost of other risk management options which may prohibit those long-term returns.
  • Risk Avoidance: This is an action that avoids any exposure to the risk whatsoever. A twenty-year-old investor keeps his savings in a low-interest savings account, avoiding taking any risk, rather than invest in the stock market despite having a long-term investment horizon. This strategy is appropriate for those who simply find the short term ‘ups and downs’ of the market too stressful to consider.
  • Risk Limitation: This strategy accepts a certain level of risk but avoids higher risk levels. A twenty-year-old investor invests in a balanced mutual fund portfolio which could include stocks from many industries, bonds and GICs. They understand that if one part of the portfolio underperforms, the other part might over-perform, giving them an overall average rate of return. This is good for people who may not want the biggest long-term return, but instead prefer good returns with a balanced approach to market fluctuations.
  • Risk Transference: This is a strategy that hands off the involvement of handling the risk to a willing third party. A person might employ the assistance of a financial adviser as they are not confident that they understand the investing industry enough to make informed, educated investment decisions with their money.