2 Comments to “How do you minimise risk with risky investments?”
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dsro said:
On July 3rd, 2008 at 8:14 pm
You minimize the risk by diversified your investments.
This mean that you need to have a lot of stocks of different business, industry and also different types of investment. This minimize the risk because when some investment falls others would go up.
Also you need to remember that by minimizing the risk your profits will be lower. More risk more yield of the investment.
Chris said:
On July 6th, 2008 at 6:55 pm
Generally risk is migitated through a couple of different ways. The first way is diversification. If you spread out your investments over a variety of asset classes and over various sectors it’s unlikely that everything will go down at the same time. Some examples of this might be to purchase stocks, bonds and precious metals and consider purchasing stocks and bonds from various sectors (defense, manufacturing, retail, healthcare etc…) to further decrease the risk.
Research is another way to decrease risk. By understanding the variables that cause risk especially in your investments you can help yourself avoid suffering. Real Estate is a great example of this. When you buy a home you are planning on selling you need to understand what risks you have encountered. For instance there is timing risk (will the market be slow when you need to sell), place risk (will a strip mall be going in next door?) and price risk (how can you be sure you are going to get a good price?) among other risks. Through research of the variables you can grasp what’s important to you in your dealings.
Last but not least many wealthy people use insurance and hedging to eliminate or greatly reduce risk. For instance if you own a portfolio of tech stocks you can purchase proshares ultrashort QQQ and if the Nasdaq falls the proshares will appreciate allowing you to reduce your losses. Insured bonds are also helpful. Some people use options and other derevatives but that all depends on experience.
On July 3rd, 2008 at 8:14 pm
You minimize the risk by diversified your investments.
This mean that you need to have a lot of stocks of different business, industry and also different types of investment. This minimize the risk because when some investment falls others would go up.
Also you need to remember that by minimizing the risk your profits will be lower. More risk more yield of the investment.
On July 6th, 2008 at 6:55 pm
Generally risk is migitated through a couple of different ways. The first way is diversification. If you spread out your investments over a variety of asset classes and over various sectors it’s unlikely that everything will go down at the same time. Some examples of this might be to purchase stocks, bonds and precious metals and consider purchasing stocks and bonds from various sectors (defense, manufacturing, retail, healthcare etc…) to further decrease the risk.
Research is another way to decrease risk. By understanding the variables that cause risk especially in your investments you can help yourself avoid suffering. Real Estate is a great example of this. When you buy a home you are planning on selling you need to understand what risks you have encountered. For instance there is timing risk (will the market be slow when you need to sell), place risk (will a strip mall be going in next door?) and price risk (how can you be sure you are going to get a good price?) among other risks. Through research of the variables you can grasp what’s important to you in your dealings.
Last but not least many wealthy people use insurance and hedging to eliminate or greatly reduce risk. For instance if you own a portfolio of tech stocks you can purchase proshares ultrashort QQQ and if the Nasdaq falls the proshares will appreciate allowing you to reduce your losses. Insured bonds are also helpful. Some people use options and other derevatives but that all depends on experience.
Good luck with your investing.