Discussing How to Manage Market Risk While Pursuing Growth
Listen to the interview on the Business Innovators Radio Network: Interview with John Wright, CFA Chief Investment Officer of Stellar Assets Discussing Managing Market Risk
In a new episode of Influential Entrepreneurs, host Mike Saunders interviews John A. Wright, CFA, Chief Investment Officer of Stellar Assets, on the art and science of managing market risk while still pursuing growth in an investment portfolio.
Wright opens the discussion with a critical truth: “A 50% portfolio loss requires a 100% gain just to break even.” This simple but sobering math highlights why risk management is just as vital as growth when building long-term wealth. “Growing wealth is essential—but protecting it is equally important,” says Wright.
Wright explains that investors face two types of losses, neither of which they are equipped to handle, but both can be equally damaging: financial and emotional losses.
- Financial losses reduce future earning potential and compounds the difficulty of reaching financial goals.
- Emotional losses often drive stress and poor decision-making. For instance, during a market downturn, fear can cause investors to sell at the bottom, locking in actual financial losses instead of waiting for a recovery.
Humans, Wright notes, are naturally “allergic to loss.” This aversion can lead investors to extremes—either playing it too safe in low-yield assets or taking excessive risks chasing quick gains.
Striking the Right Balance Between Fear and Greed
Wright identifies two dominant forces that derail investors: fear and greed. Both can lead to avoidable mistakes:
- Greed can result in overexposure, especially in bull markets, leaving investors vulnerable to painful corrections.
- Fear can cause under-investing, which may fail to keep pace with inflation or meet long-term goals like retirement.
Wright emphasizes that the key to long-term success is balancing these emotional forces with disciplined strategy.
Practical Strategies for Managing Risk and Capturing Growth
Wright outlines several proven strategies that investors can use to manage risk without sacrificing performance:
- Dollar-Cost Averaging (DCA):
Consistently investing a fixed amount over time, regardless of market conditions, helps smooth out volatility and reduces the pressure to time the market. - Diversification:
A well-diversified portfolio across asset classes provides flexibility. “You want to have something to sell when markets drop,” Wright advises, as part of a re-allocation strategy. - Options as Protection:
Wright uses tools like put options to hedge downside risk. These instruments can lock in profits or offer a safety net during major downturns. - Stay Fully Invested:
While market timing may feel safer, it often misses recoveries. “The best opportunities often arise when fear is at its peak,” Wright says. Staying invested ensures participation in market rebounds.
A Smarter Approach to Wealth Management
Wright’s investment philosophy centers on actively managed equity and options portfolios designed to seek higher returns while reducing downside risk.
“Crash-protect assets without sacrificing performance,” he says. “That’s the mission.”
About John Wright
John holds an MBA from Stanford University (’95), but unlike many in finance, his experience isn’t rooted on Wall Street. Instead, he spent decades helping Fortune 500 companies solve high-stakes challenges—growing sales, improving margins, and driving stock performance.
His career spans consulting (McKinsey), tech (HP), energy (Exxon), retail (AutoZone), and industrials (GM). Today, he brings that strategic mindset to managing client portfolios through Stellar Assets.
On a personal note, John is the seventh of nine siblings raised in a tight-knit family with strong values. He served a two-year mission in the Netherlands and Belgium and now lives with his wife and three children. His deep-rooted belief in community and service continues to shape both his personal and professional life.
Learn more about John Wright and Stellar Assets at: www.stellar-assets.com
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