There is no way to eliminate all risk from investing. If there were, investors would not be compensated for their capital. However, financial academics and professionals have devised a number of metrics for assessing risk and standard corresponding steps to minimize the risks taken to accomplish a given investment goal. Diversification and allocation are straightforward risk management tools in portfolio theory. Diversification refers to exposure to specific securities, industries, classes or other factors. Allocation refers to how well the mix of asset classes in a portfolio reflects investment needs.

Diversified portfolios are not heavily exposed to any single security, meaning that unsystematic risk has been diluted. For investors without high net worth, it is often difficult to buy enough positions to diversify a portfolio sufficiently. Exchange-traded funds (ETFs) have become a popular investment vehicle for such an audience by allowing investors to buy shares of large, diversified holdings in more accessible denominations. PowerShares Dynamic Food & Beverage ETF is the most popular ETF tracking the food and beverage industry.

If safety is an the primary requirement for an investor seeking exposure to the food and beverage industry, allocation is important. Bonds are generally considered safer investments than equities because they are senior securities in the case of liquidation, and fixed-income investments carry a promise to repay the holder at face value. Historical bond returns have lagged equity returns but have also been more stable. Importantly, bond risk is evaluated by ratings agencies such as Moody's, Standard & Poor's, and Fitch Ratings. Food and beverage industry members with outstanding investment-grade corporate bonds include Kraft Foods, Diageo, Anheuser-Busch InBev, PepsiCo, Sysco, Coca-Cola and Ambev.

  1. What are the primary risks an investor should consider when investing in the food ...

    Understand some of the various risk factors investors should consider when seeking investment opportunities in the food and ... Read Answer >>
  2. What is the average debt/equity ratio for the food and beverage sector?

    Find out more about the categories in the food and beverage sector and the average long-term debt-to-equity ratio for the ... Read Answer >>
  3. What is the average annual dividend yield of companies in the food and beverage sector?

    Examine the average annual dividend yield for the food and beverages sector as a whole, along with considering variations ... Read Answer >>
  4. What is the average price-to-earnings ratio in the food and beverage sector?

    Learn what the average price-to-earnings ratio is in the food and beverage sector and why other measures such as median should ... Read Answer >>
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