Investment risks

It seems that the main thing for an investor is to find the most suitable investment object, and then all that remains is to calculate the profit received.

But in fact, there is such a thing as investment risks, which are inherent in any type of investment activity.

That is, no matter what you invest in, there is almost always a possibility of partially or completely losing the money invested.

Therefore, it is always better to prepare for upcoming surprises than to deal with their consequences afterwards. First, let's look at how these risks are divided.

Types of investment risks

Credit risk is the probability that the other party to a transaction will not fulfill its obligations. The company whose shares you bought will declare itself bankrupt, the state will refuse to repay its obligations, or the bank will freeze deposits.

Liquidity risk is the complete inability to sell a previously purchased asset.

For example, it is currently impossible to find a buyer for your property or there are no auctions for previously purchased securities. Technical risk is the inability to close a transaction due to technical reasons.

Your Internet may be turned off, your computer may be broken, or you simply physically cannot come to the bank to personally close the deposit. Exchange rate risk is a fall in the price of a purchased security or other asset, as a result of which you will receive losses instead of profits.

How to deal with such risks?

Any trouble is easier to prevent, so let’s consider what measures can be taken at the initial stage of investment to at least somehow reduce the likely risks. To make everything more clear, let’s move on to specific examples:

• Bank deposits – we distribute funds between several banks, ideally located in different countries.

The deposit amount should not exceed that guaranteed by the deposit guarantee fund. At the moment, this amount is 700,000 rubles in Russia, 200,000 hryvnia in Ukraine, and 100,000 euros in European banks.

You can also insure your deposit with an independent insurance company; such insurance is inexpensive, but will provide additional protection for you.

• Securities – when purchasing them, it is advisable to create a portfolio of securities, thereby diversifying risks .

And in some cases it is even better to hedge. • Real estate - try to acquire more liquid properties, which are always in high demand.

For example, despite the higher cost per square meter, a 1-room apartment is always easier to sell than an apartment with a larger area.

• Minimization of technical risks - achieved through the creation of alternative communication methods, that is, in addition to the landline Internet, mobile Internet should always be available. In addition to your computer, it is advisable to install the trading platform on your smartphone.

Reducing investment risks has always been one of the main tasks of any investor; every day thousands of people lose their money only because they did not pay due attention to this issue.