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Investment tips: How much

risk should I take?

There are various risks you may subject yourself to

by taking out a certain investment. By risk, we mean

a situation that could potentially arise and have a

negative impact on the value of your investment. But,

remember, it’s important to consider risk and return;

while there is potential to lose, there is also potential

to gain.

As they say, nothing great was achieved without risk. In an ideal world,

we would be able to invest our money with little danger of anything

going wrong, and we would see a big profit in return.

•Liquidity risk

This type of risk is when limited

opportunities mean that an investor

cannot purchase an investment when

they want to or in the quantities they

need.

•Business risk

Next we have business risk, which is a

general term used to describe the risk

linked with a certain security.

Companies operating within the same

sector are going to have similar risks.

• Taxability risk

This refers to a situation whereby a

security that came with a tax-exempt

status initially then loses this status.

This applies to municipal bond

offerings.

•Credit risk

Credit risk is when a bond issuer

cannot make the principal repayment

or is struggling to make the expected

interest rate payments.

Different types of investment risk:

• Interest rate risk

This refers to a situation whereby interest

rates increase, which could cause a

fixed-rate debt instrument to lower in

value. Interest rate risk is something you

need to be concerned with if you buy

bonds or securities with a fixed rate of

return.

•Market risk

Market risk cannot be controlled by

diversification; it is a risk that will impact all

securities in an identical manner. This is

also known as systematic risk.

•Liquidity risk

Finally, reinvestment risk involves a situation

when the investor is often forced into buying

securities that do not offer the same amount

of income as their previous investment. This

is because the environment is one whereby

interest rates are declining and bonds are

due to be called in.

How to determine how

much risk to take:

Of course, the cash that you have available to invest is going to be a major determining

factor. If you are strapped for cash at present, the last thing you should be doing is putting all

of your money into a high-risk investment portfolio. Aside from this, you need to consider how

important an investment portfolio is to your financial well-being, and how long you will invest

for. Time plays a crucial role when it comes to investment portfolio management. If you have

got time on your side, you can afford a greater degree of risk, as your investments will be

able to overcome any difficult periods.

Contact Us

http://taylorbrunswickgroup.com/.Taylor Brunswick Group

20/F, Central Tower

28 Queens Road

Central, Hong Kong