Initial investment risk This is the risk of investing capital at or close to the top of a stock market cycle. As this can be detrimental to your future financial security, it is one of the most serious issues that need to be addressed in long term investment planning. Although this is not a serious issue for clients who have been invested for some time, it is of considerable importance for clients with sizeable cash balances to invest. Initial investment risk is not to be confused with investment timing which aims to correctly assess the best time to buy and sell investments for profit. Most of the time it is possible to invest the majority of the recommended stock market allocation with little risk to future financial security. Stock markets are naturally volatile and to delay investing capital at every juncture will expose investors to different types of risks.
Advisors who look to manage the initial risk of investment will often focus on the areas of value within the recommended portfolio for immediate investment. Importantly, advisors who focus on managing this risk will have deep knowledge of the mechanics and history of investing. They will also be the type of advisor to invest your funds during periods of excessive perceived investment risk; after markets have fallen significantly following or during economic or market crises, when many investors are avoiding the market.
At times, managing this risk will mean holding back a substantial part of the funds earmarked for investment in the stock market until a more appropriate investment opportunity arises. Because markets can remain overvalued for long periods of time, this may involve holding cash for years as opposed to weeks or months. If the advisor cannot value the market or the security, they will not be able to manage or assess this risk. To manage initial investment risk you need to be able to value markets and economic cycles and you need a very strong investment discipline. The opposite risk of initial investment risk is the risk that the market or security continues to rise above the level at which investment was deferred. Investors need to assess whether the risk of missing out on further rises in markets means more to them than the risk to their financial security of investing at high market levels. The problem is knowing whether or not your advisor knows what they are doing, because you have to rely very much on your advisor's expertise in this area. Advisors who focus on initial investment risk will tend to be long term, value biased and contrarian investors. . | 
