First and foremost, as a financial professional, I have a realistic outlook regarding market risk and return. Even though long-term history indicates that the stock market is one of the most lucrative liquid investments, the short-term trajectory is highly uncertain. I do not worry too much about portfolio volatility so long as I continue to believe in the long-term success of my underlying investments.

Second, I utilize an active management approach. Active management involves adjusting a portfolio’s holdings in response to market conditions and individual investment opportunities. This approach can be powerful to both minimize risk and maximize rewards. Technically speaking, active investing is the only way to avoid market volatility (although it may be exposed to other volatilities). Active management is viewed cautiously by mainstream financial theory. This is because success depends on skill, and results from an active approach are variable and not all managers will perform consistently.