‘Risk’ denotes future uncertainty about deviance from expected outcome. Whenever you make a decision – in daily life or in investment – you are exposed to an element of risk. Risk is part and parcel of investing, but if you understand the risks, you can begin to manage and mitigate them.
There exists a close relationship between Risk and Reward. Generally, investments carrying a higher risk have a higher return potential, whereas lower risk investments usually provide lower returns. The more risk you are willing to take on your investment, the more your investments could grow.
You can manage your investment risk in following four key ways:
A fund manager manages the fund who invests your money across different investment avenues, asset classes, and financial markets according to the investment objectives of the fund. Holding a well-diversified, carefully chosen portfolio of securities can help to reduce investment risk. Professionally managed funds will aim to achieve a specific objective, with an approach to risk that may align with your objective.
You might want to build a portfolio that includes a mix of asset classes such as equities, fixed income, commodities, real estate and cash, which will all offer different levels of risk and return.
Take a look at ABL Funds’ range of funds and asset classes to find out more.
A balanced diversified portfolio is made up of a mix of various asset classes based investments. You portfolio might include higher-risk investments such as equities, together with lower-risk ones like bonds, or even cash or some tangible assets like property or precious metals.
Different investments respond differently to the prevailing economic situation and will rise or fall in value at different times and at different rates. Therefore, having an unconnected asset class’s diversification can help to generate consistent level of performance over a period of time. It would be difficult for an individual investor to buy varied securities to achieve the same level of diversification, as is available through investment in a mutual fund. You own portfolio’s balance will depend on your attitude to risk, your age and your financial goals.
Take a look at ABL Funds’ range of funds and asset classes to find out more.
Markets rise and fall all the time. Usually, financial markets can experience short-term instability, brought on by a specific event or sometimes simply unpredictable investor sentiment, and it can take some time for them to balance out again. It is therefore sensible to plan for the long term.
Markets usually fluctuate over the short term but, over the longer term, the peaks and troughs may be smoothed out. However; it should be noted that there is no guarantee that this will always be true in the future.
Take a look at ABL Funds’ range of funds and asset classes to find out more.
Investing at regular intervals can also be a good idea. When you Invest at regular intervals, rather than in a lump sum, you would not be investing all of your money when the market is peaking out. Rather the average price you pay can be lower than if you had made one lump sum investment. Over time, regular disciplined investments can help smooth out the peaks and troughs.
Regular investing is easy with ABL Funds. Get in touch with us today so that we can help you get started.
