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Investment is not avoiding risk but being aware of the risk in the portfolio. Investment is about probabilities and taking a call based on that. Understanding the variables that impact the probabilities is key.
In equity space, focus on companies that can show earnings growth within the next 2-3 years. Beyond that, it is difficult to forecast with reasonable certainty. Pick companies that will surprise the market.
Besides stock selection, how the portfolio is constructed is important in capturing alpha.
Any fixed income manager looks interest rate risk, credit risk in the portfolio and liquidity risk. In credit risk, intent and cash flows of the company are key. Liquidity is very important in short-term portfolios.
When things are confusing such as with the interest rate movements, it is better not to take outsize bets till there is some clarity. Focus on data points so that there is less surprise.
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