In a form of risk is not a bad thing. Like oxygen, which has a bright and a dark side. We humans need to breathe oxygen to stay alive, as oxygen can help the burning of our precious. A certain amount of risk is necessary for the fuel of investment vehicles to offer our expected return. What matters is the amount of risk that fits the person investor.
It is very careful to determine the level of risk tolerance of an investor. This is because the level of risk tolerance is usually hidden, and even if it is discovered, not being the same for all investors. That varies from time to time as situations change. An investor who is at a point in the aggressive style can become suddenly all conservatives, after death, for example, a family member, who used to be invoked to pick up the pieces of an aggressive investment strategy.
Another problem is the difficulty Some investment professionals and novices alike experience in defining " level of risk tolerance ". Perhaps in the jargon of laypeople, & 39; level of risk tolerance " is the level of risk that may allow an investor to go to bed without worrying about what might go wrong. Measure the amount of the loss of one is willing to adopt without losing sleep and health.
Risk is sometimes also seen in the light of the lost opportunities " " as opposed to the loss in " the amount invested. For example, if for fear of excessive concentration of an investor with some parts shares, only to see the stock price soar in a couple of days, this may be seen by some as investors.
There is risk as well as the division among investors who see risk in absolute terms, and we see in relative terms. Some investors set a limit on the proportion of their money that they are willing to lose, through the fall in prices. This will be considered an investment a success, as long as there are profits in the amount invested or the total losses within the confines of the limits. If there is a gain or loss does not apply any kind of reaction by the other group, until the result has been compared to the performance of the titles of friends, family, or the stock market as a whole. For example, if an investor risk that measures gains in relative terms to a 10% increase in the amount invested in the stock market increased by 15%, the investment is not seen as a success, because the portfolio security or the higher yields that market.
Certain Stock investors argue that their actions are aggressive when they said the opposite. One example is the person who invests in a portfolio of low-risk, monitoring the intention of his wealth to allow an easy retirement. The irony is that this same person, for example, be a spendthrift to the extent that he / she can not remain at the top of the financial plan that can ensure the kind of future planned. If you see what I mean, this person is really not risk-averse!
A common blunder committed by investors, who see themselves as aggressive or conservative, is to ensure security in each of his works reflect the risk category to which they belong. I mean, if the investor thinks that is aggressive then every security in their portfolio should be aggressive and vice versa. Aggressiveness or conservatism should be measured in terms of the portfolio as a whole and not in terms of the constituent securities. Similarly, the success of the investment means that each security in the portfolio has to perform. In fact this is not the case in practice, and when it occurs after the portfolio was most likely not enough diversified.
David Opoku BA Hons. In Accounting and Finance. (At present specializes in financial advice and the stock market into a leading financial services. E-mail: davido312@aol.com
Web: www.investmentyouneed.com retta chanda
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