ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Step Up Risks for Investors - Where Are You

Updated on July 4, 2011

It is a well known fact that every type of investment whether it is stock, commodities, real estate, fixed deposits, recurring deposits, mutual funds, shares, debentures, insurance, etc. carry some risks. A smart investor is one who understands these investment risks and manages his personal finances and remains satisfied with the returns he has gained. Below are some step-up risks for investments, which you need to understand before you fall in the debt trap.

Step Up Risk 1

Buy a fixed deposit of a fixed tenure (exposes investor to credit risk), but there is some return in the form of interest.

Step Up Risk 2

Buy a fixed income security tradable in debt market (exposed to credit risk, interest rate risk, settlement risk). But this should offer better return than a fixed deposit of the same tenure.

Step Up Risk 3

Deploy a part of your net worth (may be 45% to 55%) and buy a professionally managed equity index mutual fund. Great!

Step Up Risk 4

Deploy 90% of investor's net worth into professionally managed equity fund. There's liquidity risk to staring at the face of the investor’s financial position but then, manageable because the asset he holds itself is liquid.

Source

Step Up Risk 5

Run own equity portfolio with 100% net worth, invested into micro-cap illiquid stocks. (Huh?)

Step Up Risk 6

Deploy 500% of investor's net worth into stock futures trading (gosh - you see the leverage?)

Step Up Risk 7

Deploy 10000% of investor’s net worth into illiquid real estate property, arguing that prices of real estate are destined to go up forever. (Perfect road laid down to meet destiny or bankruptcy, mostly the latter.)

There could be multiple sub-steps in between each of the two distinct steps. The investors should cut themselves off at a point where it makes sense and be content with the returns they get. Vying for too much at the cost of anything is great, but achieving that perhaps, is the feat only those heroes in Movies somehow always successfully accomplish. But well, that’s another story.

P.S.:  Putting money in a current account (or in a vault) is absolutely safe but there is zero return.

Comments

    0 of 8192 characters used
    Post Comment

    • soni2006 profile imageAUTHOR

      Rajinder Soni 

      7 years ago from New Delhi, India

      Thank you so much nanospeck and Patty for your comments.

    • Patty Inglish, MS profile image

      Patty Inglish MS 

      7 years ago from USA. Member of Asgardia, the first space nation, since October 2016

      Very good advice! I've known a couple of generations of people that have buried money in the backyard, to no good end. Rated Up!

    • nanospeck profile image

      Akhil Anil 

      7 years ago

      Hey that's good classification of risks and related links! Voted UP!

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)