When investors hear the word “Safety,” many think of guaranteed returns. At Stratzy, we look at Safety differently. Safety = Understanding Risk.
When investors hear the word “Safety,” many think of guaranteed returns.At Stratzy, we look at Safety differently. Safety = Understanding Risk.
And broadly, we see two types of risk:
1. Fundamental Risk
Business Risk
This is the risk that comes from the business itself.
We evaluate things like:
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Debt levels
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Financial strength
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Cash flows
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Profitability
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Valuation risk
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Corporate financial health
A company may look attractive on the surface, but excessive debt or weak financials can increase the probability of future problems.
2. Price Risk
Market Risk
This is the risk that comes from the stock price and portfolio positioning.
We look at:
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Whether the PE ratio is excessively high
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Price volatility
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Risk–reward ratio
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Entry price vs potential downside
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Portfolio suitability
A good company bought at the wrong price can still become a risky investment.
How we apply this on Stratzy
That’s why our baskets are designed with different risk preferences in mind:
Zero Debt Heroes
Lower Fundamental Risk
Focus on companies with no debt on their books
### Dividend Dons
Cash-Flow Focused
Focus on companies with strong dividend-paying ability
The key takeaway
Safety is not the absence of risk.
Safety is knowing which risks you are taking — and whether they fit your portfolio.
Because in investing, creating wealth is important.
Protecting wealth is equally important.
Up next in the series :Episode 4
T – Trend
Can a strong business become a great investment when the market trend starts supporting it?
Stay tuned for Episode 4.