https://highmark-funds.com/2020/07/27/market-risk-management-a-business-strategy-allowing-to-minimize-the-risks-entailed-in-business-activity/

Funds and investment

Investment funds are investment instruments that pool the funds of investors and invest it into an investment portfolio that is comprised of bonds, stocks, or other assets. Each fund is managed by a person who decides on the type of assets to purchase or sell, and charges an administrative fee to manage the fund. There are many types of investment funds, including unit trusts (UCITS), OEICs and open ended investment companies (OEIGCs).

When you are considering investing in funds, it is crucial to consider the reasons behind your decision and the length of time you’d like to invest and also your investor profile that defines your tolerance to risk. For instance, investors who are younger may have more time on their side and feel more comfortable with a higher level of risk to maximize growth over the long run.

When it comes to saving one of the best methods to lower risk is to diversify. This involves spreading your investments across a variety of asset classes that have less correlation between their price movements, so that the fall in value of a class can be offset by a gain in another.

Another way to mitigate risk is through using’smart beta or low-cost investments. These are funds that are managed passively that attempt to replicate the fluctuations of a particular index of the stock market, such as the FTSE 100, or S&P 500 without the need for judgment.

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