Diversification of financial risks

There should be an insurance springboard in any activity, let alone financial capital. It is a competent distribution of risks that helps cope with material problems – in case they arise – or get an impressive set of income upon favorable circumstances. Not every investment fund will necessarily scam or refuse to pay back deposit but all benefits tend to end. Remember it! Investor’s aim is to withdraw principle before bad times come up or diversify available budget in such a way that you remain with profit in any situation. Here is the question: “Where should one invest money?”…

It sounds like a trivial question, easy to be answered even by inexperienced user beyond investment medium. But ignorance is a weak spot of those investors who prefer making deposits without prior analytic and mathematical calculations. The one who actually entrusts his/her budget to third parties should realize that even tried scheme can produce errors, even the most honest and serious businesses may bring unprofitable periods. Nevertheless, chased advantages make a necessary push in searches for diversification sources in investment activity.

For reference:

In finance, investment is putting money into something with the expectation of gain, usually over a longer term.

source – Wikipedia

It may sound ironic, but it is a fact: capital holder will be inevitably choosing between two extremes, either reliable project or high income. It’s up to investor to pick a priority aspect. Right now we will consider different combinations of riskiness and profitability on specific examples of alternative investment:

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1) Investments with low risks:

    Bank deposits – bring from 0.6% to 1% of net profit in a month (depending on banking terms and currency type: dollar/ruble/UAH); there is an insurance system here, inflation is improbable. Conservative PAMM-accounts – operate according to principle: “slow but sure” and bring 2-5% profit per month. There are risks of partly loss of deposit.

2) Investments with medium risks:

    Investment funds involved into trust management: bring from 5% to 15% profit per month and are considered relatively reliable (probability of partly or full deposit loss is sufficient).

3) Investments with high risks:

    Aggressive PAMM-accounts – offer from 15% income within 1 month without any guarantees of security. HYIPs – bring 15-61% and more of profit in a month depending on project type, deposits are not insured, investors bear full responsibility for deposit loss.

Please, note: This article presents only one option for distribution of deposit funds, and it’s up to you to decide on the best variants. Finally, let me remind the two golden rules of investing with minimal risks: 1) distribute funds in correct proportions (for example, the majority – 50% of funds – will go to low-risk investments, 40% – to projects with medium risks, 10% – to high-yield projects ) and 2) do not invest more than you can afford to lose and, moreover, do not use borrowed funds for these purposes.

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