James B. Tharin, CFA

First Vice President - Investment Officer

Wells Fargo Advisors

 

Risk Management Strategies by James Tharin

 
Market and sector forces together typically cause 80% of the price movement in a stock. That means the company fundamentals usually account for less than 20% of a stock’s price movement. This is the reason a company’s stock price sometimes seems to move independently of the fundamentals!
 
But most people spend 80% of their time on stock evaluation and only 20% on sector and market evaluation. In other words, they ignore the greatest source of risk – market and sector forces.
 
Source: “The Latent Statistical Structure of Securities Price Changes”
Benjamin F. King
 
It is my opinion that most investors naively ignore the risks that they are taking in their investment portfolios. I employ a top down Technical and Fundamental approach to risk management in order to help my clients achieve their financial goals and manage risk. 
                                                                                       
In short, fundamental analysis attempts to identify opportunities that are priced for profit based on valuation and the story.   Technical analysis attempts to determine what is happening (trend & sentiment). I believe that the competent analyst uses all tools at his or her disposal in order to manage risk and invest for profit. To learn more about how I employ a top down approach to investing, click HERE.
 

Technical analysis is only one form of analysis. Investors should also consider the merits of Fundamental and Quantitative analysis when making investment decisions. Technical analysis is based on the study of historical price movements and past trend patterns. There is no assurance that these movements or trends can or will be duplicated in the future. Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.  CAR 0310-1616
 
Investment and insurance products:
NOT FDIC-Insured
NO Bank Guarantee
MAY Lose Value

 
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