1. Risk simply refers to the possibility that what we expect may not happen, and to manage risk is to ask what can go wrong and what we would do if it does.
2. Our problem is that we fail to consider its outcome realistically, compounding it with our faulty reaction, leading to further risks.
3. Each and every financial product which gives fixed or variable income is fraught with various types of risks.
4. Instead of getting bogged down with lame statistics generated to quantify and justify these risks, one should rather try to understand these risks before investing.
5. Fixed income products can suffer from risks related to interest rate, liquidity, reinvestment, inflation, credit rating and repayment.
6. Variable income products can suffer from risks related to interest rate, credit rating, company performance and market.
7. However, any asset-building activity can't be done without taking risks when money is made to work.
8. We should understand that future performance of financial assets is an unknown variable for all investors, with even best-managed businesses and well-thought out strategies misfiring.
9. As an investor, we can just concentrate on avoiding risky investing mistakes like:
a) Having no asset allocation strategy,
b) Overweighting on high-risk products,
c) Products not matching our risk profile,
d) Investing beyond our net surplus, and
e) Assuming short-term returns as long-term returns during goal-setting.
10. We can reasonably safeguard ourselves better against multiple ever-changing risks that are beyond our control, by:
a) Being real about our job and income,
b) Rechecking our insurance plans,
c) Repaying our debts and deleveraging,
d) Realigning our assets to our needs,
e) Cutting out "frothy" investments,
f) Tightening our expense belt,
g) Providing a stable foundation to our finances by taking adequate medical and other insurance covers,
h) Creating a contingency reserve against unexpected events,
i) Staying the course on money allocated to original goals without getting swayed by market noise,
j) Reviewing, rebalancing and ensuring that our money is spread adequately across all asset classes, and
k) Maintaining a proper balance between all investments to allow our portfolio to gain from any rebound tomorrow.
2. Our problem is that we fail to consider its outcome realistically, compounding it with our faulty reaction, leading to further risks.
3. Each and every financial product which gives fixed or variable income is fraught with various types of risks.
4. Instead of getting bogged down with lame statistics generated to quantify and justify these risks, one should rather try to understand these risks before investing.
5. Fixed income products can suffer from risks related to interest rate, liquidity, reinvestment, inflation, credit rating and repayment.
6. Variable income products can suffer from risks related to interest rate, credit rating, company performance and market.
7. However, any asset-building activity can't be done without taking risks when money is made to work.
8. We should understand that future performance of financial assets is an unknown variable for all investors, with even best-managed businesses and well-thought out strategies misfiring.
9. As an investor, we can just concentrate on avoiding risky investing mistakes like:
a) Having no asset allocation strategy,
b) Overweighting on high-risk products,
c) Products not matching our risk profile,
d) Investing beyond our net surplus, and
e) Assuming short-term returns as long-term returns during goal-setting.
10. We can reasonably safeguard ourselves better against multiple ever-changing risks that are beyond our control, by:
a) Being real about our job and income,
b) Rechecking our insurance plans,
c) Repaying our debts and deleveraging,
d) Realigning our assets to our needs,
e) Cutting out "frothy" investments,
f) Tightening our expense belt,
g) Providing a stable foundation to our finances by taking adequate medical and other insurance covers,
h) Creating a contingency reserve against unexpected events,
i) Staying the course on money allocated to original goals without getting swayed by market noise,
j) Reviewing, rebalancing and ensuring that our money is spread adequately across all asset classes, and
k) Maintaining a proper balance between all investments to allow our portfolio to gain from any rebound tomorrow.