The composition of a investment portfolio involves a range of risk types that affect the assets in each direction. Market risk relates to the fluctuations arising from the fact that the market is unpredictable and influenced polls as euphoria and despondency. Financial risk is the risk of economic shocks can hit your own investments. Country, sectoral and company risks, the risk types you expose yourself to when your portfolio is composed with such a preponderance of Portuguese, medical or General Electric shares.
Do you as an investor strive for a high yield; you also as you may know have to accept a relatively high risk profile. The elements that should have the greatest impact on your portfolio risk, is the your risk tolerance and ability, time horizon and liquidity needs.
Invest for retirement
As a general rule, the stock has higher volatility than bonds, but the risk falls, the longer you hold them.
How to allocate investments between equities and bonds is a problem that most investors have faced. There is no golden formula, but a known rule of thumb for long-term investments is that you must have your age in bond interest. Are you for 40 years, the bonds should represent about 40% of your portfolio, and shares take over the remaining 60th
Investors who are interested in government bonds are recommended direct investment in securities rather than through mutual funds.
At times, the most reliable indication of whether you have the proper risk is if you can sleep soundly at night. It is almost impossible to figure out whether your portfolio has the right risk profile when it is composed of different funds. Are you unsure about your exposure to risk, you should seek advice at your bank.
- Your investment strategy should dictate how much risk you can afford
- Start by deciding how large a share of stocks and bonds you want and go from there down into subcategories
- Seek advice from your bank - you already pay them for the service
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