Business journalist Christine Romans believes that investors have to know—and respect—the limits of their tolerance for risk.
As CNN’s chief business correspondent and co-anchor of CNN’s “Early Start,” Romans met successful risk-takers. Consequently, Romans tells us, her investing style changed to include more stocks. However, she made the change with a clear preference for security: Although 80 percent of her investments go into stocks, they’re concentrated in low-fee mutual funds and sector-focused exchange-traded funds. That’s because Romans has a low tolerance for risk despite the influence of the risk-takers whom she interviewed.
“You have to know what you are willing to lose and make sure losing it doesn’t knock you off your financial goals,” she says.
Determining her own risk level was a lesson that was imprinted on her when she covered the dot-com bust. She says she restrained her impulse to sell everything. As a result, her losses weren’t as bad as those who panicked and sold. She saw investors buying into companies that nobody really understood. “That early experience in my career taught me to understand my investments and diversify,” she says.
Romans says she routinely rebalances her portfolio and stays true to an 80-20 asset allocation. The other 20 percent of her portfolio is dedicated to more-conservative, dividend-yielding stocks.