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How To Increase Profit And Reduce Investment Risks

If you have decided to be engaged in investments, for you it is important to understand the risk at investment and as how it can be reduced.

If you want to receive initial knowledge on this question, you can address to the adviser and to be engaged in self-education. We will try to answer these questions with the simple words.

In the standard sense, the risk is possibility in the future to lose a part of the enclosed means.

For each kind of investments there is a risk. For example, investing in government bonds of rating ??? you practically won’t lose the enclosed means, but also profitableness will be low (5-6 % annual).

Investing in real estate, you also are protected from complete loss and can lose only a part of means. It can occur, if there where your real estate is located, there was a dip in prices on it, owing to ecological or natural disaster, instability of political conditions in the country, war and other force-majeure circumstances.

Investing in indexes, you can sustain time losses since indexes basically can’t go bankrupt, and only temporarily lose in the cost. Indexes can for restoration be necessary from several months till 1-2 years. That is why important long-term investment.

At stock investment two factors are very important: a choice of strong shares and a diversification of investments. For the beginning investors Dow-Johns (DJI30) index is recommended to choose only. We will remind that index DJI30 is a leading index of the American economy and probability of bankruptcy of the shares entering into it is smallest. And to diversify investments is means to take shares of the several companies entering into index DJI30. Thereby we still reduce risk since the probability of simultaneous bankruptcy of the several companies entering into index DJI30 aspires to zero.

Thus, investing in indexes or shares of index DJI30, your risk is reduced to that at any stage you will sustain losses and your capital will decrease, i.e. as specialists speak, will occur an account procorf.

What is the procorf? (Max Drawdown, it is measured in percentage). In drawing this distance from A to B i.e. if you have taken shares on $100 000 USD to point A in point B on your account remains $80 000 USD. If you begin to panic and will sell shares in point B your loss will constitute $20 000 USD. If you the competent investor, probably you know that the most successful investments are long-term investments with horizon not less than 5 years. And if you instead of selling shares in point B, will wait for another 2-3 years and then possible profitableness will constitute 180 % (in point C).

From the resulted example it is visible, as its relation to risk and how the investment horizon is important is important for the investor. I.e. in the same situation one investor will begin to panic and will sell shares in point B, having lost $20 000 USD and more skilled investor will wait and will get profit in $180 000 USD, having sold shares in point C.

It is very important that government, despite this recession is not abandoning to assist small businesses. And small business grants can be a real helper today.

But, surely, you should remember that today the fight for small business grants as well as for other kinds of grants is more fierce. This is logical – more businesses need them. So before you start your fight for the small business grants, please check out this blog for more
details about grant industry.

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