HOW TO DE-RISK YOUR PORTFOLIO

If you're worried about the market or your personal circumstances, take these steps to help you sleep at night.

- BY NELLIE S. HUANG

IT'S true what people say: If you want the most reward, you have to take the most risk. But prudent investing is about taking calculated risks, not blind ones. And after three consecutive years of hardy stock returns, it may be time to dial down the risk in your portfolio, in preparation for the eventuality of a market stumble. Or your circumstances in life might dictate a more cautious stance, for whatever reason. De-risking is about planning ahead. "After the risk has happened, it's too late," says Tim Steffen, director of advanced planning in the wealth management division of investment firm Baird.

In a classic sense, de-risking involves scaling back on stocks and moving into less-volatile instruments, such as bonds and cash. Some strategists, including Liz Thomas, head of investment strategy at SoFi, don't think market conditions warrant that right now, and you might agree. Similarly, thirty-something investors, who don't need to tap their retirement savings for decades, and investors who are already conservatively positioned may not need to de-risk. In those cases, staying the course may be the better tack—and actually avoids the risk of not meeting your goals by investing too conservatively for long-term success.

But other situations present good opportunities to shore up your portfolio by making appropriate tweaks. Over the next few pages we'll review some de-risking strategies for several circumstances, including temporary hurdles (your job is in jeopardy or you're nearing retirement), more lasting ones (such as a change in your comfort level with risk), and other situations.