Risk Management
Risk Management
When investing in stocks, bonds, or other securities, there will always be a degree of risk involved with your purchase.
In order to maintain healthy financial hygiene, you must optimize your balance of risk and profits. Here are a few guidelines to achieve this:
Diversification: This pertains to holding multiple assets in different industries, geographical regions, and sectors. This way, if one investment underperforms, the others will be there to compensate.
Asset Allocation: Determine an appropriate mix of assets based on your financial needs. Balance between stocks, bonds, ETFs, cash, etc. Generally speaking, stocks will be more volatile (more risk and more reward), while bonds offer lower returns and relative stability.
Research: Be proactive and hold yourself responsible for learning about your assets; there are tons of resources available including the news, podcasts, and articles which can help you do so. Before making a decision, consider factors like industry trends, company financials, and competitive positioning.