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Understanding the Risks


Highest Money Market Rates
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Money market investing involves lending and borrowing money or assets on a short-term basis. Maturities usually last less than a year or up to 13 months maximum. Because of this nature, money market is considerably stable, safe and very liquid. Its core is made up of banks borrowing and lending with each other through various financial vessels. Trades in money market cover treasury bills, bankers’ acceptances, commercial paper, federal funds, certificate of deposits (CD’s), and mortgages that are short-lived. Investments on money market are held by a bank or by a financial institution. Due to the very conservative marketing strategy, money market may only give you minimal but modest returns. Most likely, on the average, it will be 2% – 5% per annum.

Asset Protection
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As an entrepreneur, you surely understand that owning and operating your own business can be burdened with risks and financial losses. Generating a profit is not easy, while turning a profit is a real task. Asset protection is necessary to secure your business from lawsuits and claims.

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Investing in the stock market is burdened with worry, for a good reason. Stock market risks are everywhere. If you mislay half of your investment, you must be able to double your returns to breakeven or earn some. While you don’t want to lose money, regrettably, the risks involved in the stock market are at all times present. However, without facing the risks, you can’t anticipate reward. Thus, successful investors execute risk management techniques to minimize losses. Handling risks in the stock market begins with recognizing the type of risk and acting to alleviate their unconstructive impact on your investment portfolio.

Investment Gambling
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Once you have a sense of the money you can spare for investing, you’ll need to decide just how much risk to take with those funds. Unfortunately, all too often people skip this step and don’t follow proper investment advice. They think of investing money like gambling money. Once they decide how much they’re willing to play with, they’re willing to risk it all.

10 Tips to Eliminate Risks
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Investment planning is almost impossible without a thorough understanding of risk. There is a risk/return trade-off. That is, the greater risk accepted, the greater must be the potential return as reward for committing one’s funds to an uncertain outcome. Generally, as the level of risk rises, the rate of return should also rise, and vice versa.

Are You Over-Diversified?
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Anyone who has spent much time reading about personal finance knows the value of diversification in a portfolio. If you put all your money into just one or two investments – stocks, bonds, or anything else – you run the risk that something will go wrong and wipe out a big chunk of your nest egg. (Enron, anyone?)

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Diversification is one of the fundamental tools in our arsenal of reducing risk and is the arguably the most important. Diversification is used in a portfolio (group) of investments in order to reduce the unsystematic risk level that was introduced previously.

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Once your risk tolerance, intrinsic and time value of risk have been derived you are able to use asset allocation in order to establish what are the best investments for you.

What are the Different Types of Risk?
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What are the different types of risks? There a number of differing types of risk that can affect your investments. While some of these risks can be reduced through a number of avenues – some of them simply have to be accepted and planned for in any investment decision.


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