Managing risks associated with investing
Whenever or however you choose to invest, there will always be risk involved. Luckily, there are strategies you can adopt to manage this risk in the best way possible for you and your investment goals.
Unfortunately, volatility in financial markets can cause an investor to lose their confidence. The Australian Government has provided Australians with a number of tips on how to minimise the risks involved in investing, to ensure they remain confident and their investments stay strong.
Consider the following:
Goal setting is particularly important in a volatile market. Without a plan in place, when the market drops, an individual can be quick to panic and pull their money out. Reacting like this can cause you to lose out, so ensuring you have a goal and a plan will help you handle these times, without losing your head.
A profile that is diversified is much more secure in times of market volatility because it is less exposed to the negative impacts of a specific economic event. Investing in a number of different industry sectors, asset classes and even geographic locations will see your portfolio become more diversified.
Knowing what is going on with your investments is important, as a significant loss in one or more of your assets could cause your portfolio to become unbalanced and less secure. You should receive periodic transaction statements that indicate the value of your investments, as well as the fees and taxes paid. Analysing and responding to this will help you stay involved.
Look out for scams
When markets are volatile, investors are more vulnerable and this is the time that scammers will arise and try to take advantage of the situation. Many scammers catch people out by offering something that sounds too good to be true, by saying they are a representative of a well-known company when they aren’t, or when they contact you in a way that seems suspicious, like a random phone call or through social media. Scammers may offer you investment options that provide high and quick returns, tax free benefits, no risk or low risk investments or even a discount for investing early before a public float. Be weary of all of these. If you are interested, you should always say you need time to think about it and do your own research before committing.
Financial advisors are there to offer you assistance and to help you make the best possible decisions for your investment portfolio. Find a professional that you feel confident with, and don’t hesitate to contact them for help and guidance.