The Concepts of Risk and Spreading Your Investments

Putting your savings or capital in investments in stocks and shares is subjecting these to a certain amount of risk. Investments fall and rise and can go either way, so you may end up having less cash than your initial outlay. So is there any manner you can safeguard your investment or at best minimize the risk? In a few words yes, by spreading your investments over several different companies and marketplaces.

Putting all your funds into one place is a recipe for economic disaster as the risks are numerous. Investing in a single account exposes your money to more risk since the fund management organization could collapse, the stock market index to which it’s linked could perform badly and even just a simple lack of rise in the spot it invests plus a poor fund manager are typical potential risks.

The best way to reduce risk is to begin small, then gradually growing your portfolio with time. Don’t pile in instantly; begin with safer investments and, when you are more assured, you can look into the riskier investment types. In case you are looking at ISAs, it might be easier to start with a cash Isa before moving on to stocks and shares ISAs. Your first investment ISA should probably be a FTSE tracker fund or perhaps a UK equity earnings fund since these are viewed as less risky.

You should be conscious of your financial targets and investment objectives before looking into funds which carry a higher risk. Depending on your investment outlook, you might choose a different investment strategy; for instance, it doesn’t make much sense to invest in a high risk fund if you really don’t want to lose any money. In that case, you will be better off choosing a lower risk fund. In short, you need to understand how much risk you are willing to take before choosing your investments.

For example, you might choose a UK company bond fund, in which case your money would be invested in the debt of large blue-chip firms. Alternatively, there are UK development funds which look at smaller British businesses or companies that have the prospect to progress rapidly in the near future. Although more risky, you can also choose a fund that invests in European or United States organizations overseas. Even though they pose higher risks, UK income funds can also be considered; other available choices include funds that invest in high yield ties in goods, properties, or growing markets.

Regardless of your financial situation, you should look at spreading the risk and getting into more diverse investments and property classes for instance equities, ties, cash and goods. A well-balanced money investment portfolio is less prone to risks and therefore more likely to realize bigger profits in the long run.

Tips For Investing Your Hard-Earned Dough

1. Start Today

Whatever your circumstances are right now step up and start doing something different from today. It is a common mistake to wait for when the time is right, or when you have some spare money you will start investing, as David Bach points out in his best selling book The Automatic Millionaire The Pay Yourself First Rule is the first rule to start implementing and the sooner you start the better.

Start investing at least 30 minutes a day of your time on raising your financial IQ and even if you have £1.00 a day right now to invest with just do it this habit alone has the power to transform your future.

2. Make It Your Mission To Move To The B/I Side Of The Cashflow Quadrant

If you are an employee right now looking to start your own business, good for you! It is one of the major decisions in life when you believe in yourself enough to throw away the stabilisers of having a nice safe pay check each month and step up to the fact that if you want to create the lifestyle of your dreams then becoming a business owner is definitely a step in the right direction.

Moving from being employed to self-employed is a big step for a lot of people but being self-employed in professions that rely on your expertise is still in many ways trading time for dollars. The goal is to aim at becoming a business owner / investor (the B/I side of the Cashflow Quadrant) where it is essential to acquire financial intelligence to get paid.

3. Manage Your Money Well And Aim At Keeping More Of It

There is a huge difference between the amount of money you earn and the amount of money you keep and the people who get really good at making more money and keeping more of it in general will create surpluses that will ultimately work for them. Setting a goal of having money work for you is a great investment goal but it can be really hard for people in this day and age to achieve.

The vast majority of people in the last decade or so have seen their surplus income diminish as their credit cards and loan payments have increased. Today’s economic times have the governments printing more money daily than ever before to try and deal with their own over borrowing and that is bad news for the consumer as commodities will need to keep rising to keep pace.

So a good place to start is to get back in control of budget and look for ways to INCREASE your income to create surpluses in addition to savings you can make.

4. Never Make Your Goal Getting Out Of Debt

If you put all your efforts into getting out of debt you are aiming at reaching zero in your bank account. Although there is a considerably amount of stress and suffering that goes with the territory, I am with Bob Proctor on this one..

If you are thinking about debt you will attract more of it to you the universe cannot determine between get into debt or get out of debt and the only way to deal with it is to meet it head on and set about paying it off each month at an affordable amount that leaves you:

A. In control of the whole situation if possible.

B. Leaves you with enough money to cover your essentials plus start building a contingency, investing in your education / personal development / start saving for a major purchase / giving a percentage to charity. Even if these amounts are small amounts again it is the habit that is important.

C. Allows for you to invest 10% of your gross earnings each and every month.

5. Make It A Goal To Build A Network Of Advisers Around You

Nobody can know everything, and you certainly cannot be an expert of all things so it makes sense to seek out and find specialists in their fields to assist in building your financial golden goose.

Personally given the High Street banks track record in recent years and the financial economic world crisis laden with trillions of debt and no growth we see around us today I certainly will not be listening to any politician or bank manager about what may or may not be a good investment vehicle for my money.

Once you seek out excellent people in the investing world such a Mike Maloney for example you will soon realise that the so called breaking news you hear today is old news that was predicted some time ago by real experts in their field, nicely side stepped and turned into a profit situation instead.

6. Be Open Minded To The Fact That You May Be Holding Yourself Back

As a female myself I am more than abundantly aware of how much the vast majority of women talk about their feelings whereas the vast majority of men talk about logical reasons why something is what it is.

So when it comes to investing you can imagine what kind of disconnect occurs all the time, in one extreme there are the savers and at the other extreme there are the spenders. So unless you address your feelings towards money and investing you are going to find a total imbalance when it comes to preparing a solid financial future.

In every situation in life you immediately rely on the files in your mind for a solution or a response. You can’t help yourself it is who you are and what is in your mind,,, and that is what is usually holding you back.

If you knew people were making 100% annual returns during this economy would you believe them?

Your mind would either be open to the possibility immediately or closed because the only thing on offer at your local bank is a 3% ISA.

The only thoughts you will ever have about money, investing and growing wealth are planted like seeds in your mind from experiences and people you have had or met up to this point in your life and the older you are.. usually the more you have! My grandson would have no issue in believing that 100% returns were possible because his mind is wide open to all possibilities.

Your decisions are based on what you believe is logical, sensible and appropriate for you at any one time.

What if the High Street offers are for the vast majority of people who are conditioned to believe what they have always been told is safe.

What if you are so sure you are right when it comes to handling money that anyone cannot possibly know any better!

The vital step is to change your awareness that you may just have a problem in the first place.

7.You Are The Full Deck Of Cards The One Who Holds All Four Aces

For a lot of people it is always somebody or something else’s fault, there are always factors in every decision to be considered but at the end of the day the decision making is always yours.

The aim of building your own financial golden goose is for you to leave a legacy and to help make the world a better place, you can never spend your financial golden goose, it is there to lay golden eggs and yes you can spend the golden eggs but only on cashflow producing investments to continually build your networth and your legacy.

Alternative Investments – Financial Alternatives

It is now a widely held belief that investing in stocks and other financial instruments in the traditional manner generates an investment return that is driven more by the latest piece of political rhetoric, or the most recent announcement of sovereign debt risk or unemployment figures from some far flung corner of the world, than by underlying company fundamentals like good management and a strong balance sheet. Aside from this inherent volatility, many investors also feel over-exposed to financial markets, especially those coming close to retirement that may have little time left to regain catastrophic losses in any one holding.

This shift in mind-set amongst investors has driven a huge growth in alternative investment management, with most financial institutions now offering investments that are organised and managed in such a way as to attempt to avoid volatility, or generate a return when markets fall, or some other such strategy.

Short Only
Short only funds bet on particular stocks losing value. Investors might buy into a short only fund if they felt particularly bearish (pessimistic) about the short term future of financial markets in general, and some may allocate capital to this strategy as a hedge against the impact of a general downturn.

Ultra-Short Bond Funds
This a type of investment fund that invests fixed-income bonds with very short-term maturities. Such a fund will usually invest in bonds with maturities of around 12 months. This strategy is designed to generate higher yields than traditional bond investing with less volatility.

Market Neutral
Market neutral is an alternative investment strategy designed to profit from growth and depreciation in the value of stocks. Whilst there is no finite technical definition for market neutral investing, for the most part, the overall strategy will involve taking long and short position in a stock (betting both for and against it) in order to maximise the return from making good stock selections and minimise the impact from broad market movements.

Absolute Return
The original name for hedge funds – absolute return investing involves a wide variety of alternative investment management techniques designed to capture financial gains during any and all market conditions. Absolute returns refer specifically to the return of the fund or investment over a given period of time i.e. the actual growth or depreciation. This differs from relative returns, which is a measure of investment returns when compared to similar investments or a sector.

Long / Short
A true mixed bag of investing, long short strategies involve taking long positions in one stock and betting against the value of another stock. In theory, as one sector or company makes a gain, there will be losses in competing sectors, and investment manager aim to identify such opportunities and capitalise on them. A broad example might be an investment manager who thinks oil prices will rise significantly based on some impending political or social crisis, so they might buy into oil company stocks and short stock of companies that rely heavily on oil as a key input in their business.