In Today's dynamic economy, a great number of individuals want to use their money to generate income or profit by investing into different activities. But most of these people do not know how to invest wisely; as a result they lose their hard earned money badly.
As every investment involves risk, it is important to learn techniques and strategies that minimize the risk associated with investment. The most effective way of minimizing the risk is diversification. Diversification involves spreading your portfolio over well researched investment opportunities.
There are different ways to diversify your portfolio: Diversify among asset class, Diversify globally, diversify by sector and Diversify by style.
Here is how to diversify your portfolio among three asset classes:
1.Investing in Stock Markets
Stock market involves buying shares in a particular company. When you buy a share, you become a share holder of the company. If the company gets high earning, you receive cash dividends proportional to your initial investment. If the company suffers loses during a year, you may not receive any profit. At the same time, if the company decides to expand its business with its profit, there is a possibility that you may not get your profit for that period.
The best way to invest in stock markets is through Brokerage Company. You pay the purchase of the shares and the commission for the broker's services. Brokers can also sell your stock shares if you are willing to sell your stock.
You can earn large profits over a long period of time. But it involves a risk. Stock values change continually and often very large. As a result you do not have assurance that you will get back your initial investment. A business recession or poor company management may reduce the company earning power. As a result people may not show interest to buy stocks from the company. At this moment, your share value may drop, and if you decide to sell your stock there is a probability of lose.
One way of minimizing risk is buying combination of stocks from different industries. Always avoid investing in single stock.
2.Bonds
Bonds are less volatile as compared to stocks, mostly they provide regular income. If your are more concerned with safety of your investment, it is recommended to allocate more of your portfolio towards US government or insured bond investment rather than stocks.
3.Short Term investment
Short term investment includes money market accounts and Certificate of Deposit. Compared to Stock markets and bonds, they yield small profits. They may also provide little protection against rapid inflation. But these kinds of investments usually offer insured principal.
To summarize, to minimize the risks associated with investment, you should always diversify your portfolio over well researched asset class. It is also important to diversify with in each asset class. Be advised that: the safest investments with the lowest returns are government bonds and certificate of deposits.
by John David
Saturday, November 04, 2006
Making Your Own Investment Decisions
Most people have a broker that makes all of their investment decisions for them. They rarely even look at their portfolio to see what it contains, and they review their account statements only once per year, because their goal is for their account to grow in the long run.
However, you should not rely on your broker to do everything for you, because most stockbrokers have many clients, and do not pay close enough attention to your account to make the small trades here or there that can really help you maximize your return, or get out of a stock that is weighing down your portfolio so that money can be transferred into something else that would be more remunerative. Simply put, your broker or financial advisor does not make the necessary short-term investment decisions to maximize the performance of your account. You need to become familiar with each stock you have in your portfolio so that you can make decisions on your own in the short-term, while still relying upon your financial advisor to structure your portfolio with a mix of the right instruments (stocks, bonds, money market, etc.) to help you make money in the long run.
To make your own investment decisions, you need to review the most recent balance sheet and income statement for the company, as well as some other important statistics. You can access these reports online on any stock quoting website. Simply enter the ticker symbol for the company you want to evaluate, and then there should be a link to their income statement and balance sheet on that page.
When looking at the balance sheet, compare the assets for the current reporting period to the previous period. Did the assets, such as revenue from sales, increase or decrease? Check the liabilities from the previous period as well. And, you should check whether shareholder equity has increased or decreased. This is important to you as an investor because shareholder equity is the true worth of a company to its shareholders. If the balance sheet does not have shareholder equity listed, simply subtract the total liabilities from the total assets to arrive at the number.
When looking at the income statement, you should look at the earnings figures. The earnings figures are listed at the bottom of the income statement. Have earnings increased or decreased since the previous income statement was issued? If there is a decrease, what is the reason? Is it because the company is struggling, or is it because of some non-recurring expense they had to pay that will not affect their earnings in the future? Earnings are important to you as an investor because a portion of this money is paid out to the shareholders in the form of a dividend.
Next, there are a few statistics that you should evaluate which are also listed on the profile for the company when you look them up online. The two most important statistics to look at are the P/E ratio and the PEG ratio. Typically, you can find these numbers under the statistics section for the company.
The P/E ratio is the price-to-earnings ratio. It is calculated by dividing the price for one share of stock by the earnings per share. Most companies have a P/E ratio between 15 to 25. Some companies trade at P/E ratios as high as 70 or higher, such as Google. If a P/E ratio is very high, the stock might be overvalued, meaning it could come down in price in the future. But, a high P/E ratio often means that the company is expected to grow its sales and earnings significantly in the future, so investors are willing to pay more than the stock is currently worth because the price will be justified in the long run, and the company will be able to pay larger dividends when its earnings increase.
A low P/E ratio could mean that a company is undervalued, meaning that the stock price will likely go up in the future. However, a low P/E ratio could mean that investors are abandoning the stock because future sales and earnings are expected to decrease. When evaluating the P/E ratio, you need to assess the overall situation and future sales expectations in order to properly interpret what the P/E means for you as an investor.
The other important statistic, perhaps more important than the P/E ratio, is the PEG ratio. The PEG is the price-to-earnings growth ratio. It is calculated by dividing the P/E ratio by the annual earnings growth per share. This ratio helps you to ascertain whether the company is growing its earnings enough each year to justify the current price of the stock. If a company is not growing its earnings at all, then the stock will not go up. If the earnings are growing significantly each year, then the price of the stock will rise accordingly. Since earnings growth is the real impetus behind an increase in the price of a stock, the PEG is probably the best tool for evaluating whether the stock has hit the wall or will continue to increase. If the PEG is less than 1, the stock will likely continue to go up. If the PEG is much higher than 1, then the stock might go down. However, a high PEG could mean that a company is expected to grow tremendously in the months and years ahead.
I hope this information will help you make your own investment decisions. Try to set aside some time to review each stock that you have in your portfolio, and then use the procedures outlined in this article to examine the value of the stock. This will help you grow your investments much more in the long run than if you rely solely on your broker or financial advisor to do all the work for you.
by Jim Pretin
However, you should not rely on your broker to do everything for you, because most stockbrokers have many clients, and do not pay close enough attention to your account to make the small trades here or there that can really help you maximize your return, or get out of a stock that is weighing down your portfolio so that money can be transferred into something else that would be more remunerative. Simply put, your broker or financial advisor does not make the necessary short-term investment decisions to maximize the performance of your account. You need to become familiar with each stock you have in your portfolio so that you can make decisions on your own in the short-term, while still relying upon your financial advisor to structure your portfolio with a mix of the right instruments (stocks, bonds, money market, etc.) to help you make money in the long run.
To make your own investment decisions, you need to review the most recent balance sheet and income statement for the company, as well as some other important statistics. You can access these reports online on any stock quoting website. Simply enter the ticker symbol for the company you want to evaluate, and then there should be a link to their income statement and balance sheet on that page.
When looking at the balance sheet, compare the assets for the current reporting period to the previous period. Did the assets, such as revenue from sales, increase or decrease? Check the liabilities from the previous period as well. And, you should check whether shareholder equity has increased or decreased. This is important to you as an investor because shareholder equity is the true worth of a company to its shareholders. If the balance sheet does not have shareholder equity listed, simply subtract the total liabilities from the total assets to arrive at the number.
When looking at the income statement, you should look at the earnings figures. The earnings figures are listed at the bottom of the income statement. Have earnings increased or decreased since the previous income statement was issued? If there is a decrease, what is the reason? Is it because the company is struggling, or is it because of some non-recurring expense they had to pay that will not affect their earnings in the future? Earnings are important to you as an investor because a portion of this money is paid out to the shareholders in the form of a dividend.
Next, there are a few statistics that you should evaluate which are also listed on the profile for the company when you look them up online. The two most important statistics to look at are the P/E ratio and the PEG ratio. Typically, you can find these numbers under the statistics section for the company.
The P/E ratio is the price-to-earnings ratio. It is calculated by dividing the price for one share of stock by the earnings per share. Most companies have a P/E ratio between 15 to 25. Some companies trade at P/E ratios as high as 70 or higher, such as Google. If a P/E ratio is very high, the stock might be overvalued, meaning it could come down in price in the future. But, a high P/E ratio often means that the company is expected to grow its sales and earnings significantly in the future, so investors are willing to pay more than the stock is currently worth because the price will be justified in the long run, and the company will be able to pay larger dividends when its earnings increase.
A low P/E ratio could mean that a company is undervalued, meaning that the stock price will likely go up in the future. However, a low P/E ratio could mean that investors are abandoning the stock because future sales and earnings are expected to decrease. When evaluating the P/E ratio, you need to assess the overall situation and future sales expectations in order to properly interpret what the P/E means for you as an investor.
The other important statistic, perhaps more important than the P/E ratio, is the PEG ratio. The PEG is the price-to-earnings growth ratio. It is calculated by dividing the P/E ratio by the annual earnings growth per share. This ratio helps you to ascertain whether the company is growing its earnings enough each year to justify the current price of the stock. If a company is not growing its earnings at all, then the stock will not go up. If the earnings are growing significantly each year, then the price of the stock will rise accordingly. Since earnings growth is the real impetus behind an increase in the price of a stock, the PEG is probably the best tool for evaluating whether the stock has hit the wall or will continue to increase. If the PEG is less than 1, the stock will likely continue to go up. If the PEG is much higher than 1, then the stock might go down. However, a high PEG could mean that a company is expected to grow tremendously in the months and years ahead.
I hope this information will help you make your own investment decisions. Try to set aside some time to review each stock that you have in your portfolio, and then use the procedures outlined in this article to examine the value of the stock. This will help you grow your investments much more in the long run than if you rely solely on your broker or financial advisor to do all the work for you.
by Jim Pretin
Worldwide Investment Distortions in Stocks, Real Estate Markets
Today an investor needs to be aware of and cautious about the distorted worldwide investment climate that exists thanks to the policies since 2000 of the US Federal Reserve System and the departed chairman Alan Greenspan.
Mr Greenspan thought that the answer to all financial problems was simply to create more money. But not by actually producing more goods and providing services but by the unchecked sheer power of the money creation tools of the magical United States Federal Reserve system. Without going into all of the details in this short article the money was created out of thin air without any backing whatsoever. And not a little of it, enormous liquidity was provided under the chairman's rein.
In fact, Greenspan was essentially giving away money for free as he and the Federal Reserve lowered rates far below the inflation rate. No wonder so many people and corprations took on a boat load and a half of debt.
The unprecedented creation of liquidity in the US financial system attempted to cover up the effects of the towering twin trade and fiscal deficits sustained by the US and to prop up and to enhance the performance of a basically weak economy that in recent years has had its' manufacturing base severely eroded as jobs move overseas or simply vanish.
Only blatant changes made in the economic number reporting statistics, very creative accounting practices, and the enormous artificial expansion of the money supply kept the US economic numbers from looking as they truly are; which are sub par performance levels for the weakest economic recovery on record.
In the short run Mr Greenspan's management of the US money creation machine seemed to have been successful. The real estate market worldwide exploded with "values" reaching sky high levels. Stock markets worldwide benefited from large amounts of the excess liquidity finding its way into stocks.
Home owners were able to extract huge amounts of cash from their homes by refinancing and by taking out home equity loans and then use the proceeds to purchase all manner of consumer goods, thereby boosting the economy.
With borrowed funds so readiliy available and the government encouraging people to go deeper into debt the allocation of capital was seriously mismanaged in the US. Most of the excess liquidity flowed into consumer goods, housing, and stocks instead of expanding the nations productive capacity and repairing crumbling infrastructure.
Unfortunately, the root causes of the US's poor performance with trade and fiscal deficits were not addressed. They are still out of control and are clearly unsustainable. One not so fine day the devil will demand his due. That day is probably not so far away as a number of nations, including Russia and the Chinese have began to slowly adjust their exposure to US dollars. An unexpected financial crisis of any sort could swiftly cause a stampede out of the dollar with unfortunate consequences for investors worldwide.
The big question now is can such bubbles in values that the excess liquidity brought to world investment markets be slowly deflated or we at risk of a sudden collapse of values right across the investment spectrum? The answer to that question is not at all clear as of this date, October 27, 2006.
However, when we look at history, the outlook of returning to the mean of long term investment trends without serious incident is not good. Bubbles have never ended calmly and without pain and a great deal of stress and suffering on many investors and financial institutions.
So what should a prudent investor do? IMHO the best thing is to keep things very simple and come back to cash and gold. Converting inflated assets of all classes of investments to a ratio of cash and gold that you feel comfortable with should put one into great shape for the next ten years or so.
After all you will be selling out at or near all time highs in most markets and at least preserve the wealth that you have accumulated thanks to Alan and company at a time when the investment cycle may suddenly reverse with disastrous results for those greedy folks who decide to go for the final little bit of return.
Being in cash with at least modest holdings in gold as an insurance policy has never been as attractive as it is right now. Forget why the TV talking heads say. They are for the most part overpaid teleprompter readers and actors who will only get you into trouble if you take their always bullish advice.
Remember, that no one in the history of the world ever went broke selling out at or near market highs but plenty of folks have been totally ruined by overstaying markets and then freezing into inaction as values collapse.
Be a good investor and let the other guy get the last buck or two that's on the table. After all, in order for you to liquidate at near all time highs there have to be folks out there who still think that values will increase further from grossly inflated levels.
by Gerald Greene
Mr Greenspan thought that the answer to all financial problems was simply to create more money. But not by actually producing more goods and providing services but by the unchecked sheer power of the money creation tools of the magical United States Federal Reserve system. Without going into all of the details in this short article the money was created out of thin air without any backing whatsoever. And not a little of it, enormous liquidity was provided under the chairman's rein.
In fact, Greenspan was essentially giving away money for free as he and the Federal Reserve lowered rates far below the inflation rate. No wonder so many people and corprations took on a boat load and a half of debt.
The unprecedented creation of liquidity in the US financial system attempted to cover up the effects of the towering twin trade and fiscal deficits sustained by the US and to prop up and to enhance the performance of a basically weak economy that in recent years has had its' manufacturing base severely eroded as jobs move overseas or simply vanish.
Only blatant changes made in the economic number reporting statistics, very creative accounting practices, and the enormous artificial expansion of the money supply kept the US economic numbers from looking as they truly are; which are sub par performance levels for the weakest economic recovery on record.
In the short run Mr Greenspan's management of the US money creation machine seemed to have been successful. The real estate market worldwide exploded with "values" reaching sky high levels. Stock markets worldwide benefited from large amounts of the excess liquidity finding its way into stocks.
Home owners were able to extract huge amounts of cash from their homes by refinancing and by taking out home equity loans and then use the proceeds to purchase all manner of consumer goods, thereby boosting the economy.
With borrowed funds so readiliy available and the government encouraging people to go deeper into debt the allocation of capital was seriously mismanaged in the US. Most of the excess liquidity flowed into consumer goods, housing, and stocks instead of expanding the nations productive capacity and repairing crumbling infrastructure.
Unfortunately, the root causes of the US's poor performance with trade and fiscal deficits were not addressed. They are still out of control and are clearly unsustainable. One not so fine day the devil will demand his due. That day is probably not so far away as a number of nations, including Russia and the Chinese have began to slowly adjust their exposure to US dollars. An unexpected financial crisis of any sort could swiftly cause a stampede out of the dollar with unfortunate consequences for investors worldwide.
The big question now is can such bubbles in values that the excess liquidity brought to world investment markets be slowly deflated or we at risk of a sudden collapse of values right across the investment spectrum? The answer to that question is not at all clear as of this date, October 27, 2006.
However, when we look at history, the outlook of returning to the mean of long term investment trends without serious incident is not good. Bubbles have never ended calmly and without pain and a great deal of stress and suffering on many investors and financial institutions.
So what should a prudent investor do? IMHO the best thing is to keep things very simple and come back to cash and gold. Converting inflated assets of all classes of investments to a ratio of cash and gold that you feel comfortable with should put one into great shape for the next ten years or so.
After all you will be selling out at or near all time highs in most markets and at least preserve the wealth that you have accumulated thanks to Alan and company at a time when the investment cycle may suddenly reverse with disastrous results for those greedy folks who decide to go for the final little bit of return.
Being in cash with at least modest holdings in gold as an insurance policy has never been as attractive as it is right now. Forget why the TV talking heads say. They are for the most part overpaid teleprompter readers and actors who will only get you into trouble if you take their always bullish advice.
Remember, that no one in the history of the world ever went broke selling out at or near market highs but plenty of folks have been totally ruined by overstaying markets and then freezing into inaction as values collapse.
Be a good investor and let the other guy get the last buck or two that's on the table. After all, in order for you to liquidate at near all time highs there have to be folks out there who still think that values will increase further from grossly inflated levels.
by Gerald Greene
Day Trading for a Living - How lucrative it is?
Day Trading for a Living - How lucrative it is?
Have you ever thought about becoming a day trader? Is day trading for a living a lucrative field? What about the risk that is associated with day trading?
If you are at all interested in becoming a day trader and day trading for a living, then read on. There is a lot of information out there for day trading. Everybody has their own formulas and everybody will want to give you advice. Some of this advice will be worth it and some will not.
Let me be the first to give you some advice. Make sure you feel comfortable with your investments and make sure that you trust your gut instinct. Do not risk more money than you can afford to lose, at first, just to be safe. Take your time building up your portfolio and give yourself time to learn the trade.
This is a very lucrative field and there are many millionaires that have made their money by trading stocks, currency, bonds, and investing in mutual funds. The most successful day traders have a strong balance between short term investments and long term investments.
There are a few risks to consider before you start investing. There is always the possibility of losing money, and most successful day traders make mistakes and lose money at some point. It is a numbers game. You have to have strong long term investments that are going to produce nice gains over a 10 year period.
You will also want to have strong short term investments, but allow for some chance and mistake in this area. So what if you lose a few dollars in one short term investment, the next one might be the one that you triple your money on. As long as you come out ahead in the end you will be successful.
by Benjamin Ehinger
Have you ever thought about becoming a day trader? Is day trading for a living a lucrative field? What about the risk that is associated with day trading?
If you are at all interested in becoming a day trader and day trading for a living, then read on. There is a lot of information out there for day trading. Everybody has their own formulas and everybody will want to give you advice. Some of this advice will be worth it and some will not.
Let me be the first to give you some advice. Make sure you feel comfortable with your investments and make sure that you trust your gut instinct. Do not risk more money than you can afford to lose, at first, just to be safe. Take your time building up your portfolio and give yourself time to learn the trade.
This is a very lucrative field and there are many millionaires that have made their money by trading stocks, currency, bonds, and investing in mutual funds. The most successful day traders have a strong balance between short term investments and long term investments.
There are a few risks to consider before you start investing. There is always the possibility of losing money, and most successful day traders make mistakes and lose money at some point. It is a numbers game. You have to have strong long term investments that are going to produce nice gains over a 10 year period.
You will also want to have strong short term investments, but allow for some chance and mistake in this area. So what if you lose a few dollars in one short term investment, the next one might be the one that you triple your money on. As long as you come out ahead in the end you will be successful.
by Benjamin Ehinger
Online electronic day trading - 3 basic tips
Online electronic day trading - 3 basic tips
Are you ready to start day trading online? Online electronic day trading is becoming more and more popular and there is a lot of money to be made day trading. Are you ready to begin trading online and making money? Here are my 3 basic online electronic day trading tips.
Day trading tip #1 - Balance your portfolio.
I know you have probably heard this over and over again. It is very true though. You must have a balanced portfolio. You need to think about the money you are going to be making today and the money you are going to want to make in the long future.
Balance your portfolio by using mutual funds, currency trading, stocks, and bonds. Use both short term and long term investing. It is a good thing to have a few long term investments with large stable companies that split on a regular basis.
Day trading tip #2 - Don't be afraid to take a few chances Most successful day traders have taken a few losses here and there, but they are not afraid to take a chance. Even if you take a loss every once in a while the gains you can experience when you take a chance will outweigh your losses.
Day trading tip #3 - Do your research and know your investments
In order to take chances and make smart investments you should always do full research of the companies you are investing in. Look into their past, present, and their future plans. You need to know what you are investing in and what type of management team the company has.
Use these three tips, that I have given you to start making money day trading. Remember to always be studying the market and the companies you want to invest in. The better you know your investments and possible investments, the better your decisions will be, and the more money you will make.
by Benjamin Ehinger
Thursday, November 02, 2006
Forex (Foreign Currency Exchange Market) has been used by international banks and large investment companies for years to make millions of dollars. Ho
Forex (Foreign Currency Exchange Market) has been used by international banks and large investment companies for years to make millions of dollars. However, with easy access to the Internet, it is now possible for anyone to take advantage of this powerful tool and make money the same way large institutions do, even with minimal startup funds at hand.
Even experienced investors seem mystified by Forex and have very little understanding of it. Forex is not much different from the Stock Market, often the same or similar techniques can be used to trade currency as is used to trade stocks and commodities. What make Forex so mysterious is the lack of available information and opportunities of training.
I have listed 10 good reasons why I prefer Forex to the Stock Market or any other investment option and why any individual, or small investor, should look at getting involved with Forex:
1. A 24 hour market. You don't have to worry about running out of time because the Forex is open 24 hours a day, nearly all week.
2. Huge liquidity. Have you ever got stuck trying to get rid of some stocks or options? With Forex, there are always buyers, thousands of them!
3. No commission on your trading. This is specially important for individuals with small amount of money to invest. When using other investment vehicles the cost of the investment is often prohibitive no matter how attractive the investment itself is. Brokerage and other government fees can easily eat up your profit even before you completed a transaction. With Forex, there are no brokerage, government etc fees involved.
4. Low transaction costs. Typically less than 0.1%!
5. No middleman. The investor is dealing directly with the Market.
6. Instantaneous transactions. Forex is fully computerised and transaction can be completed in as little 2 seconds. The investor does not have to wait for trade confirmation to arrive by email, worst yet, by post. All 'paper-work' is in electronic format, easily viewed, search, analysed.
7. Huge leverage yet low margin. Both increase your profit. In most cases leverage of 10:1 to 100:1 is the rule not the exception.
8. Minimal startup requirements. Again very important for individual or small investors. With Forex it is possible to start trading with as little as $300.00 dollars!
9. Easy access to the Market and your accounts, online, 24/7. Since Forex is completely computerised, anyone with Internet access can trade online and easily access their account and trading history. Most trading platforms allow the user to export this information to other third party software for storage, graphing, analysis etc.
10. No insider trading. Because of the way Forex is 'de-centralised', it is almost impossible for anyone to fraud the system.
I could go on for ever about Forex, it is an amazing tool for investors and also a very exciting opportunity for individuals. I hope you'll catch the fever, too.
Submitted by Ference
Even experienced investors seem mystified by Forex and have very little understanding of it. Forex is not much different from the Stock Market, often the same or similar techniques can be used to trade currency as is used to trade stocks and commodities. What make Forex so mysterious is the lack of available information and opportunities of training.
I have listed 10 good reasons why I prefer Forex to the Stock Market or any other investment option and why any individual, or small investor, should look at getting involved with Forex:
1. A 24 hour market. You don't have to worry about running out of time because the Forex is open 24 hours a day, nearly all week.
2. Huge liquidity. Have you ever got stuck trying to get rid of some stocks or options? With Forex, there are always buyers, thousands of them!
3. No commission on your trading. This is specially important for individuals with small amount of money to invest. When using other investment vehicles the cost of the investment is often prohibitive no matter how attractive the investment itself is. Brokerage and other government fees can easily eat up your profit even before you completed a transaction. With Forex, there are no brokerage, government etc fees involved.
4. Low transaction costs. Typically less than 0.1%!
5. No middleman. The investor is dealing directly with the Market.
6. Instantaneous transactions. Forex is fully computerised and transaction can be completed in as little 2 seconds. The investor does not have to wait for trade confirmation to arrive by email, worst yet, by post. All 'paper-work' is in electronic format, easily viewed, search, analysed.
7. Huge leverage yet low margin. Both increase your profit. In most cases leverage of 10:1 to 100:1 is the rule not the exception.
8. Minimal startup requirements. Again very important for individual or small investors. With Forex it is possible to start trading with as little as $300.00 dollars!
9. Easy access to the Market and your accounts, online, 24/7. Since Forex is completely computerised, anyone with Internet access can trade online and easily access their account and trading history. Most trading platforms allow the user to export this information to other third party software for storage, graphing, analysis etc.
10. No insider trading. Because of the way Forex is 'de-centralised', it is almost impossible for anyone to fraud the system.
I could go on for ever about Forex, it is an amazing tool for investors and also a very exciting opportunity for individuals. I hope you'll catch the fever, too.
Submitted by Ference
Risk Investment Analysis
In a quality investment guide risk assessment, a key principle, will be addressed. If we are to be successful in our investment endeavors and to ensure that we have a portfolio that is going to provide us with consistent rewards we must fully understand risk and how it applies to our personal character as well as our portfolio structure. Risk is something that we deal with in almost every aspect of our life. And we as a society are very aware of risk and do many things to reduce risk in our lives. We will purchase health, auto and life insurance. We make sure that all our children are using seat belts and helmets under certain conditions. We will check out the prospective of a company before submitting a resume. There are many more things I can point out but what is amazing is that a majority of the time when it come to investing we do not complete an investment risk assessment. So many investors fail to identify or measure the risk involved, instead they look for the maximum rewards. In fact this is one of the biggest mistakes that is made by investors both novice and experienced. A portfolio should not be structured around the maximum reward instead it should be structured around the highest amount of reward with the least amount of risk. A portfolio built on a strategy of highest return vs. lowest risk is what leads to a successful portfolio that will help you accomplish your personal investment goals. This is why rather then focus on maximum returns the smart investor focuses on Return vs. Risk. But part of that formulation is also understanding what risk is and knowing what your personal risk tolerance is when structuring your portfolio. Total risk assessment has several variables when undertaking an investment risk analysis of one's portfolio. There is the risk of the asset allocation that we are all aware or heard about but there is also your personal characteristics that are a very important factor as well. How much you can personally afford to lose will not be the same as say your son. Also how much risk you can emotionally tolerate will not be the same as the next individual.
There is a web site that is discussed in Successful Online Portfolio Management that is totally committed to identifying and placing a measurement on investment risk. And the best part about this site is that it is absolutely free. The name of the site is RiskGrades and its URL is "http//:www.RiskGrades.com" it is an absolute must for any investor no matter what hisher investment skills are. Riskmetrics is the term used for providing investors with updated daily risk measurement information for all traded financial assets. And the solutions to your risk characteristics can be solved through utilization of the RiskGrades web site.
The RiskGrades web site contains three very valuable tools that every tool-kit should contain.
1 - A risk management online free e-course that is divided into 3 modules
I- Identifying Risk
II- Measuring Risk
III- Managing Risk
Each module takes about 45 minutes and can be taken online at the RiskGrades web site.
2 - A risk-profile-quiz that will help you understand your own personal risk tolerance. This is a very quick quiz that is also taken online at the RiskGrades web site.
3 - Portfolio risk measurement software that you can use to analyze the risk of your portfolio.
There is a web site that is discussed in Successful Online Portfolio Management that is totally committed to identifying and placing a measurement on investment risk. And the best part about this site is that it is absolutely free. The name of the site is RiskGrades and its URL is "http//:www.RiskGrades.com" it is an absolute must for any investor no matter what hisher investment skills are. Riskmetrics is the term used for providing investors with updated daily risk measurement information for all traded financial assets. And the solutions to your risk characteristics can be solved through utilization of the RiskGrades web site.
The RiskGrades web site contains three very valuable tools that every tool-kit should contain.
1 - A risk management online free e-course that is divided into 3 modules
I- Identifying Risk
II- Measuring Risk
III- Managing Risk
Each module takes about 45 minutes and can be taken online at the RiskGrades web site.
2 - A risk-profile-quiz that will help you understand your own personal risk tolerance. This is a very quick quiz that is also taken online at the RiskGrades web site.
3 - Portfolio risk measurement software that you can use to analyze the risk of your portfolio.
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