I prioritize diversification and assess each investment's risk profile thoroughly. I recommend a mix of high-growth assets and stable, low-risk investments to spread exposure. Regularly reviewing the portfolio and adjusting based on market conditions ensures that growth objectives are met while maintaining acceptable credit risk levels. This approach helps manage risk without sacrificing potential returns.
I think it's a tricky balance with the key being you have to understand your risks/rewards and what you are trying to accomplish in client portfolios. For example, in the portfolios that I manage for wealthy clients, the credit risk comes from private credit bonds. We don't take any liquid credit risk as the credit spreads are too tight, the volatility is too high, and it's highly correlated to equities. Within the private credit exposure, we focus on top-quality managers with longer track records and don't chase extra growth at the expense of lower-quality bonds. This strategy has worked well for our portfolios as our credit risk exposure has produced yearly positive high single-digit returns with lower volatility than the US Aggregate Bond Index.