Though the starting point is a goals-based investing approach, the choice of the single investments composing the portfolio is based on a contrarian approach with a dynamic management style. Today most investors are focused on volatility, and there is an extreme request for volatility compression, which has created a bubble in search for low-volatility financial products. I believed that volatility must be managed, not compressed, and that it is necessary to take into consideration other factors, such as: liquidity conditions and liquidability of the investment, long term inflation and interest rate dynamics. Today the world is emerging from a 40-year cycle of disinflation, and we may be embarking on a new long term cycle of increasing inflation. In the past, long term cycles of rising inflation were generally accompanied by the implementation of capital controls and by measures aiming at the repression of interest rate below the rising inflation rate: success in such an environment will require portfolio strategies which are completely different from the strategies which have had success in the last decades, as the historical correlation between bond and stock prices changes drastically.

Most of all, to obtain success with a financial plan in the long term, it’s often critical to avoid risks which are not yet evident. When a risk is evident, it’s generally too late. The key to success often resides in identifying and avoiding hidden risks which are highly probable but not yet evident, which implies "second-order thinking", noticing anomalies even the crowd seems to not notice anything strange at all.
To quote the Harvard Business Review: "The clearest signal that a novel risk is emerging is anomalies—things that just don’t make sense. This sounds obvious, but most anomalies are difficult for people to recognize… Recognizing a novel risk requires people to suppress their instincts, question their assumptions, and think deeply about the situation”.

One important hidden risk today is the illiquidity combined with excess diversification. Many investments have a hidden illiquidity: many investments which normally easy to liquidate may become illiquid during a crisis; this is particularly true for structured investments like investment certificates. Also, many balanced portfolios are often over-diversified in too many investment funds which then invest in correlated markets. A portfolio which is invested in an extreme number of mutual funds and ETFs and not in single stocks and bonds, may be over exposed to correlated indexes, but most importantly, may become difficult to modify in a very short time and with very low costs when the market risk changes in a short time period. One must consider also that many undervalued investments are not necessarily represented by main market indexes: there is often good value to be found among such investments. That is why not only funds and ETFs must be taken into consideration, but also single stocks and bonds as well as real investments such as commodities and precious metals. Though financial planning is the starting point for long term goals, short- term market shocks can drastically reduce the value of assets, especially in the case of liquidity shocks. When potential risks become too high, it may be a prudent to liquidate some investments, stay in cash and await the next opportunity, to reduce risk and protect the value of the portfolio. Doing this should be relatively simple and not costly.

Another hidden risk present today is the mania for controlled volatility financial products. Volatility should be managed, not artificially compressed through the use of structured products, which may create only an illusion of safety. Today liquidity risk is just as important as managing volatility: many structured products become illiquid during market downturns. I always aim to advise investments taking in account such risks.

A diversified portfolio must not mean a blocked portfolio. Even though the starting point is goals-based investing, and the time horizon must always be long term, liquidity shocks may go great damage to the portfolio short term, and so it is sometime necessary to manage these risks by occasionally reducing investments and raising cash: there are moments in which this is the only protection.