Personal Finance Blog India –

Risk Management:

Risk is the chances of partial or complete loss of the capital.Different investment options carries different kind of risks.

In general,,risk and returns walks together.If you want higher returns on your investment,you should be ready to face the higher risk.

1.Fixed Deposits: Though investors feeling is that fixed deposits are safe.It is not true.In India,even nationalised banks have insurance of upto Rs.1Lakh only.Fixed deposits carries credit risks.A human error,unseen liabilities can cuase risk to the deposits.

2.Mutual Funds: Mutual funds carries the potential market risk.Mutual funds can cause short term erosion of capital and carries huge risk for short term investors.

3.Share trading: Trading in F&O segment have much more risk potential than cash market.As future market offers leveraged ,margin trading chances are quite high that all capital drain out with small opposite movement.

4.Commodity trading: It have similar risk as share trading.

Risk Management:Though there is a risk to your investment,it can be managed by some simple ways

1.Avoid : It involves avoidance of the security which is not suitable for investor.E.g.conservative investors should try to avoid trading in future  markets.

2.Share:Share the risk with one or more similar minded investors.

3.Risk budgeting: Control your risk by using stop loss orders as per investors budget.

4.Diversification: It is the best tool of risk management.Rather than direct share trading investors can invest through mutual funds to avoid share concentrated risks and also can add different assets like Gold,Silver etc.

Category: Mutual Funds, Uncategorized


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