Portfolio Risk Management
Short Training Session | ILO-Based
Icebreaker: "What comes to your mind when you hear 'risk in investments'?"
• Sample answers: Loss of money, market fluctuations, inflation
What is Portfolio Risk?
Risk Definition Inherent Nature Better Decisions
Risk = possibility of losing Risk is inherent in all Understanding risk → better
money or not achieving investments financial decisions
expected returns
Interactive Prompt: Share real-life risk examples
Sample Answers:
• Investing all money in one stock → market/concentration risk
• Savings losing value due to inflation → inflation risk
Types of Portfolio Risk
Market Risk Credit / Default Risk Liquidity Risk
Stock market / economy Borrowers fail to pay Cannot convert to cash quickly
Inflation Risk Concentration Risk
Purchasing power decreases Too much in one asset
Activity: Rank risks for a small investor
Sample Answer: Market & Concentration → most impactful; Credit & Inflation → medium; Liquidity → least (if
emergency fund exists)
Principles of Portfolio Risk Manageme
Diversification Asset Allocation Risk Assessment
Spread investments % in equity, debt, cash, High/medium/low
gold
Regular Monitoring Align Risk with Goals
Review periodically Match horizon & objectives
Interactive Prompt: Explain diversification in one sentence
Sample Answer: "Spread your money across assets to reduce risk."
Example Risk-Managed Portfolio
Investment Type Risk Level Purpose
Savings Account Low Emergency fund / liquidity
Fixed Deposit Low-Medium Short-term security
Balanced Mutual Fund Medium Medium-term growth
Equity Mutual Fund High Long-term growth
Gold / Real Estate Medium-High Hedge against inflation
Activity: Simulate portfolios for:
1. Young Professional
2. Mid-career Investor
3. Retiring Individual
Sample Answer:
• Young → Higher risk: Equity MF + some Balanced MF
• Mid → Medium risk: Balanced MF + FD
• Retiring → Low risk: FD, Savings
Managing Portfolio Risk – Practical Tips
Start Small
Understand Each Asset
Monitor Performance
Avoid Emotional Decisions
Stay Informed
Interactive Question: Which tip is most important for beginners?
Sample Answers: Start Small, Understand Each Asset, Monitor Portfolio
Common Risk Scenarios
Scenario Activity: Identify the type of risk
Market crash Company defaults Need cash urgently
→ Market Risk → Credit Risk → Liquidity Risk
Inflation erodes savings Investing only in one stock
→ Inflation Risk → Concentration Risk
Quiz / Knowledge Check
True/False:
1. Diversification eliminates all risk Answers:
2. Equity investments usually carry higher risk than FD • False
3. Inflation reduces real value • True
4. Monitoring portfolio helps manage risk • True
• True
Activity – Build a Mini Portfolio
Instruction: Allocate ₹50,000 across Savings / FD, Balanced MF, Equity MF, Gold/Real Estate
Sample Answer:
Asset Type Allocation Risk Level Purpose
Savings / FD ₹15,000 Low Emergency fund
Balanced MF ₹15,000 Medium Medium-term growth
Equity MF ₹15,000 High Long-term growth
Gold / Real Estate ₹5,000 Medium-High Inflation hedge
Activity: Group discussion, explain reasoning for allocations
Key Takeaways
Risk is Universal Risk Reduction Tools
All investments carry risk → must be managed Diversification, asset allocation, monitoring
reduce risk
Goal Alignment Long-term Stability
Match risk with financial goals & time horizon Proper risk management → long-term financial
stability
Interactive Wrap-Up:
Question: "One step you can take today to better manage risk?"
• Sample Answers: Start small, diversify, track portfolio