What is the risk of portfolio?
The risk of portfolio concerns the combined risk associated with all securities within the individual's investment portfolio. This risk is generally inevitable, because there is a modicum of the risk in any type of investment, even if it is extremely small. Investors often try to minimize the risk of portfolio through diversification, which includes the purchase of many securities with different characteristics in terms of potential risk and reward. There are certain risks that cannot be solved by diversification, and these risks known as market risks can only be reduced with contrast investments. In fact, investing of any kind brings the risk that capital will either be completely reduced or lost. When all investments in the portfolio are together, their combined risk is known as the risk of portfolio.
Investors use many different means to try to reduce rIzika portfolio, which must spend. Portfolio diversification is one of such ways to achieve this because it means building a portfolio full of heterogeneous securities and various types of investment. In this way, there is a risk that one or even more securities will be underestimated by the fact that there are many others in the portfolio to balance them. In addition, the selection of various types of securities, such as some stocks and some bonds, can protect the investor from one type of security passing through.
Some risks are resistant to diversification tactics and represent a different challenge for the risk of portfolio managing investors. These risks are known as market risks or systematic risks and may sweep the entire market or segment of the market. An example, the economy in the recession is likely to cause a wide range of securities to damage the diversified portfolio. Investors must try to invest known as Hedges that basically bet against the performance of AktiV they already have at a time like these.
It should be noted that a subtle investor is willing to accept a certain amount of portfolio risk as a compromise for the potential for high investment rewards. After all, securities that have the lowest level of risk, such as bonds issued by the government, also provide a very low return on investment. Investors looking for growth must be able to take a small risk to obtain such yields they are looking for for their portfolio.