Diversification of capital.

When managing capital, there are many ways to protect it from potential risks, one of the most effective options is diversification of fund distribution.

Capital diversification is the rational distribution of available funds among various investment options. This takes into account not only the profitability of the investment but also the risk level of such investments.

The primary goal of capital diversification is to protect investors from total loss due to unforeseen events. To more fully understand the meaning of this term, let's consider two areas of its application: forex and investments.

Capital diversification as it applies to forex trading.

The basic rule of capital management is "Don't put all your eggs in one basket." This is the principle you should follow when managing your funds when trading Forex.

• To achieve this, you should not deposit more funds into your trading terminal account than is necessary for trading. Yes, some brokers offer quite favorable interest rates for unused funds, but you risk losing everything.

• If possible, it is better to open two small accounts with different brokers than one large one with one brokerage company.

• Constant withdrawal of profits - immediately decide on the amount of funds you are trading, and transfer the excess money to another account or withdraw it outside the company.

• When working under a trust management system, also distribute your funds between two or three managers.

Diversification in investing.

When choosing an investment source, we first determine two key factors: risk and return on investment.

For example,

investing in precious metals offers a potential return of approximately 5-10% per annum, with a minimal risk of 1 on a 10-point scale.

Investing in real estate offers a return of 5 to 10 percent, with a risk of 1-2.

A bank deposit offers an annual return of 20%, with a risk of 2 on a 10-point scale.

Mutual funds offer a return of 30-50 percent, but with a higher risk of around 4.

Forex trust management offers a return of 50 to 300 percent per annum, with a risk of 6-7.

Pyramid schemes offer returns of up to several thousand per year, with a maximum risk of 10.

Here's a rough rating scale for the most common investment methods. After that, all you have to do is properly allocate (diversify) your available funds.

Diversification works according to the following principle: the higher the investment risk, the smaller the investment amount. For example, you could distribute your funds as follows:

Gold and deposits – 60% of your total funds;
investment funds – 30%;
and trust management – ​​10%.

It's advisable to have at least three investment options.