Risk Management

August 30, 2010 · Posted in Financing 

Management, administration or management of risk in terms of personal finances is to control the risk that may exist when investing money.

Every investment has a risk, i.e. a probability of obtaining bad results, in general, the more potential to provide an investment return, the greater the risk involved, and, conversely, the less cost it offers, the lower its risk.

For example, investing money in creating a company has a high promise of profitability, but also a high risk, as opposed to, for example, put money into a savings account, which has a low profitability, but also a low risk.

One objective of risk management is to minimize or reduce the risk that there may be the time to invest, although, however, risk management also involves taking some risk to the extent that it seeks to earn higher returns.

Irrigation management involves the following steps:

* Collection of information: is to gather information, or well informed about an investment before deciding to purchase it, which means knowing their characteristics, advantages, disadvantages, cost-effectiveness offered (for example, your interest rate in case it has ), its market, and so on.
* Information analysis: is to analyze the information collected, or the investment itself, in order to determine as accurately as possible their profitability, their performance, the capital recovery period, safety and risk, etc…
* Comparison of investment alternatives: should have several investment alternatives, we proceed to compare them taking into account such factors as the required investment, profitability, risk, liquidity, etc.
* Selection of the best investment alternative: in this step is necessary to choose the best investment alternative, based on factors such as our capital, knowledge, profitability objectives, risk tolerance, etc.
* Diversification: diversification is to create an investment portfolio or diversified portfolio, i.e. not to concentrate all the money in a single investment or a single type of investment, but distributed in different investments to minimize risk.

[Post to Twitter] Tweet This Post  [Post to Delicious] Delicious This Post  [Post to Digg] Digg This Post  [Post to Facebook] Facebook  [Post to MySpace] MySpace  [Post to StumbleUpon] Stumble This Post 

Related Post:

Tags: , ,

Comments

Leave a Reply