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Global Asset Management Korea: Get To Know Investment Risks

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Get To Know Investment Risks and Avoid Scams

It is ideal these days to invest your money for future endeavors and plans; it also ensures financial stability. The funds from your investments can provide financial sufficiency, especially in rough times like the bankruptcy of the company you work at or being hospitalized for sudden health problems. However, investment comes with a risk like scams. With just a snap, your money can be gone.

Scams are prevalent for investors, especially those who have just started getting into this business. An investment scam is usually an act of giving ‘too good to imagine’ business offers with ‘too good to imagine’ profit. The usual investment frauds are done through cold calls, seminars, and superannuation. Investment scams are not the only problem you must think of with investing, though. Profit, which is the reason for investing in the first place, must be your priority.

The common mistake that a lot of investors have is impulsiveness. These people are more likely to fail in the market, making immediate decisions without considering the profit and other risks. This is when risk management and risk management organizations take place.

Investment Risk Management

There is no assurance of getting rich by investment alone—it does not work that way. Investing requires critical thinking, good decision making, and professional consultation for better results. Global Asset Management Korea provides investment returns unfailingly on inconsistent financial markets and is one of the companies that offer financial management and professional support in all investment matters.

Different Investment Risks

Marketing Risk

Investment risks are in the form three main types: equity risk, currency risk, and interest rate risk. Marketing risk is a result of declining investment values due to some economic factors affecting the whole market.

Liquidity Risk

Liquidity risk is compromising your investment price because of being unable to be sold at a fair price. The worst-case scenario is being unable to sell this at all, having zero profit and zero return.

Concentration Risk

Growth is hard when you do not diversify your investments. Sticking to a single type increases the risk of loss, lacking investment fallbacks. Therefore, to avoid concentration risk, it is suggested to invest in different kinds of investment.

Credit Risk

It is the risk of not being paid due to financial difficulties within the government or the company that has issued the bond. Credit risk includes the chance of not getting the interest and even the invested principal money.

Reinvestment Risk

Reinvestment risk is resulted from reinvesting the principal money into new investments with lower interest rates. For instance, from a 5% interest rate, you decided to reinvest your money with a 3% interest rate. Doing so will affect your profit and will even challenge the principal investment.

Inflation Risk

This is something related to the amount of your investment. As time passes by, a particular amount of money would buy fewer products, making your profit lesser. If the inflation rate continuously increases, it will soon eat your profit, leading to losing your investment.

Horizon Risk

This risk is often a result of sudden situational changes, usually losing jobs and business bankruptcy. Horizon risk is the risk of losing financial stability, forcing you to sell your investments, which could happen when investments’ price is low in the market.

Investment Strategies

There are strategies that you might want to check out before starting your investment. Here are some:

Asset Allocation

Reasonable asset allocation refers to the manner wherein you weight assets in your portfolio to try to meet a specific objective—and it may be the most critical factor in the success of your portfolio. You can picture it with a scenario of putting an 80% – 20% distribution for stocks and bonds, respectively. This allocation applies to a case of pursuing market growth with the courage to encounter market troubles. The company Global Asset Management Korea can manage budgets within your portfolio accordingly to the timeframe and the possible risks you might face and the rewards for each asset class.

Risks and Rewards of Asset Allocation

  • You can earn higher profits and have better long-term returns.
  • It would be risky for short-term investments knowing about fluctuating markets. However, this lessens the inflation risk; therefore, your assets can cope up with economic difficulties.
  • With money market instruments, inflation risk is pretty much a problem. Moreover, stability for in here is a bit shaky.

Portfolio Diversification

Portfolio diversification is simply having sets of investments in different companies. It helps an investor to get less chance of experiencing concentration risk—a risk of losing investments placed in a single company when unexpected challenges occur. For instance, it would be better to divide your assets and invest it in more companies than investing 100% of it in a single company based on its performance merely. This will allow you to increase your investments continuously without worrying about the risk of losing all these in a sudden matter. Global Asset Management Korea has experienced professionals who can help you diversify your portfolio, maximizing objectivity in achieving financial security.

Risk and Rewards of Portfolio Diversification

  • Profit is more challenging for short-term investments.
  • Lessens the risk of losing profit and capital, especially for long-term investors.

Dollar-cost Averaging

It is a strategy that helps an investor to avoid making decisions impulsively. Using the Dollar-cost averaging method, you allow yourself to limit and impose a particular amount to be spent on investments in a specific period. Therefore, the number of shares you can purchase for a specific period depends on the amount of your investment as well as the prices of each share. But for this to be done more confidently, it is suggested to consult with a financial advisor. Moreover, this investment strategy perfectly fits those who want to manage their capital systematically and those who are new in the market. Global Asset Management Korea is a company known for its high-rated client service, making it perfect for people who just got into this business.

Risk and Rewards of Dollar-cost Averaging

  • Limits the chances of purchasing great shares due to the fixed investment amount for a particular period.

Systematic and helps the flow of your investment to be smooth.