Be Risk Aware, not Risk Averse
Many investors today — both individuals and even some high-net-worth investors — unknowingly approach investing backwards. They focus on returns first and only think about risk afterward, if at all. At Alamut Capital, we believe that true investing success begins with understanding risk — not chasing returns.
5/7/20252 min read
Today, we’ll walk through why this common mistake occurs, why it's dangerous, and how smart investors align their portfolios with their personal risk profile — letting returns naturally become a by-product of smart risk decisions.
1. How Most Investors Think Today: Return First, Risk Second (or Never)
Many investors fall into these traps:
Comparing everything to the S&P 500. Even balanced portfolios and global funds are compared to the S&P 500, despite completely different risk profiles.
Setting unrealistic return goals without understanding risk.
Aiming for "8-10% returns" without considering the risks required.
Judging success solely by short-term performance.
Ignoring whether the portfolio aligns with their actual needs and goals.
2. The Fundamental Truth:
Returns Are the Result of Risk Exposure — Not the Other Way Around. Every portfolio’s return potential is tied directly to its risk level. Higher risk = Higher potential returns and higher chances of large losses. Lower risk = Lower potential returns and greater stability.
Risk is the input. Returns are the output.
3. Why Misunderstanding Risk Leads to Big Mistakes
Focusing only on returns can cause:
Excessive risk-taking without realizing it.
Panic selling during downturns.
Unrealistic expectations and portfolio abandonment.
Failure to meet actual financial goals.
4. How to Invest the Right Way:
Step 1: Assess Risk Capacity and Risk Tolerance
Risk capacity: Your financial ability to handle losses.
Risk tolerance: Your emotional ability to stay invested through volatility.
Step 2: Define Financial Goals
Identify timelines.
Define objectives and critical milestones (e.g., retirement, education, home).
Step 3: Design Asset Allocation Based on Risk
Choose your equity, bond, cash, and alternative exposures based on risk, not returns.
Step 4: Set Return Expectations Realistically
Accept returns that match your portfolio's risk, not arbitrary benchmarks.
Step 5: Monitor and Adjust Over Time
Rebalance as goals or circumstances evolve.
5. A Simple Analogy: Racing Cars vs Family Sedans
Imagine two drivers: Formula 1 car: High speed, high risk. Family sedan: Reliable, safe.
It’s unfair to compare their performances. Each vehicle serves a different purpose — just like different portfolios.
Your portfolio should match your financial "vehicle," not someone else's race.
6. How Alamut Capital Helps Investors Invest Smarter
At Alamut Capital, Risk comes first. We build portfolios after a deep risk profile analysis. Returns are a by-product. We seek the highest risk-adjusted returns.
Personalization matters. Every investment journey is unique. Our Investment Solutions and How they align to Risk and Goals. Explore our Investment Solutions for more information.
Final Thought
Define your risk. Align your investments. Let returns follow. Investing is not a race for the highest return. It’s about reaching your financial destination safely and confidently.

Contact us
It is never too early to get started on your investment plans and never too late to take control of your financial future.
invest@alamut.capital
© 2025 Alamut Capital. All rights reserved. Advisory services offered through Alamut Capital Advisors Inc ("Alamut Capital"), a US SEC registered investment adviser. Disclosures & Disclaimers
Alamut Capital Advisors Inc.
401 Bay Street, Suite 1600,
Toronto, ON, Canada, M5H 2Y4