Positive investment and future risk management

Some investors believed that they had "the right" to search for 10% of their investment portfolios every year in the years 1982 to 2000 without identifiable risk. After the 2001-2003 bear, the mentality returned. People have short memories and they have again suffered the period between October 2007 and March 2009. The risk was on the threshold, and everyone was surprised. Warren Buffett, George Bush, and many more on the list. Nowadays everyone is concerned about the risk. In the "new normal" era, the question is how wisely the risk should be taken into account.

Asset Allocation: Everyone has heard of it, but who does it? Strict model is one of the most important when everyone sells and sells when everyone buys. One or two times a year the portfolio is reviewed. A change in life, whether personal, emotional or financial, is a real cause for setting up a portfolio. But do not blindly follow the rigid formula. We identify our macro views that require the highest concentration (and the lowest). The same can be said of the fixed income world, which is created in many different ways.

Declaration of investment policy is essential when managing a tool allocation program. This is because we are getting information that will help our clients focus on strategies that affect our three-legged chair for successful investment, capital appreciation, risk tolerance and liquidity issues. The lack of such a policy can make the client in the direction he can argue in the future. Whether you have conservative, moderate or aggressive portfolios, all parties involved must agree on the beginning and the relationship.

Listed Options: Options can be used to increase revenue with a variety of strategies. One such strategy is the "collar". The motivation of this strategy can be two reasons. The first is that you have a limited risk, limited upside potential in a stock you want to buy. The second reason is that you can handle a position that can be very large for your portfolio or a very low cost base that is hoping to avoid selling.

Let's take a sample traffic. IBM is currently trading at $ 155.00. February's 155 calls can be sold, which expires in 30 days at $ 2.50. The disadvantageous protection is to buy the 150th February for $ 1.25. At maturity, if the stock is 155 or more, the investor "exercises" and the position is $ 156.25. I took out the $ 1.25 credit from the two option deals and added that amount to $ 155. This means 10% annual return. At the disadvantage, "break even" is $ 153.75. The risk is limited to $ 150.00. Ideally, the risk must be equal to the reward, but this example is for illustrative purposes only.

Due to the current bear market, many investors are underfinanced. Institutional and individual investors need to cut off everything from their capital to eliminate the poor performance, but they must be cautious not risking much risk. Asset Allocation, Investment Policy Statement and viable option strategies are the cornerstone of the future of positive investment and risk management opportunities.

Source by sbobet

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