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The Downside of Managing Downside Risk

Products that promise to reduce risk are tempting, but it's better to focus on valuations and long-term fundamentals than short-term price movements.

By Daniel Needham, President & Chief Investment Officer, Morningstar Investment Management

Despite the postelection rally that delivered robust returns for U.S. equities, 2016 was a decidedly volatile year for markets. With heightened market volatility came increased discussions about risk management. This is a common response, and when volatility returns—which it always does—the popularity of risk-focused approaches and products will spike, too.

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