RiskGrades

RiskGrades is an offering by the Riskmetrics Group, originally launched by JP Morgan as a free service to promote Value-at-Risk (VAR) as a risk-management tool in 1994 but now operating as an independent company.

RiskGrades is both educational and practical in that it teaches the basics of risk management and enables private investors to apply these techniques to their investments. The site operates normally in Internet Explorer but not in Mozilla Firefox.

RiskGrades is divided into four distinct areas which are easily accessible from an overhead menu (visible in Internet Explorer but not in Firefox):

Get a RiskGrade: Obtain a risk score for an individual share or fund holding (from 11 countries), bond, index or currency. Use the lookup button to find its ticker number. Generate a risk chart showing the Riskgrade relative to those for all other tickers. You can also plot price, price v RiskGrade, streak (winning/losing) and Riskgrade range charts with benchmarking, going back to 1999.

Portfolio Analysis: Enter your holdings by ticker number (obtainable from Get-a-RiskGrade). The default table displays your portfolio by Riskgrade score, Risk Impact (i.e. change in Riskgrade if you switch a holding into cash), XLoss (the maximum expected loss during extreme market movement) and market value.

Alternative views are by chart, risk v return (including return adjusted for risk or Riskreturn), asset class/ sector analysis and benchmark.

Experiment with your portfolio (What If?) by adding or removing holdings and noting the change in the RiskGrade. The Event Risk tool lets you test the resilience of your portfolio during historical periods of financial stress such as Black Monday, the Gulf War, the euro crisis, the Mexican peso crisis, the Asian crisis, the "Tech-Wreck" and 7/11.

Asset Selection: The potential cracker is the Asset Selector that filters out shares and funds by up to four criteria including RiskGrade and RiskReturn. Asset Selector currently works for UK equities but not for funds.

Education: A three module course on the identification, measurement and management of risk. If you are unfamiliar with the territory, make this your first port of call.

It takes a little while to get to grips with the tools and the concepts, but it really is worth the effort. Navigation is straightforward albeit slow. Given the quality of the content, I am ready to forgive these shortcomings.