Entering the World of Investments

Whether you are a new investor or have an established portfolio, investing in any area can be scary and confusing. There are many different ways to invest your money, but how and where you do depends on many factors. The one term that encompasses all these factors is risk tolerance. When investing, you always need to ask yourself “what’s my risk tolerance?”

There are 4 key factors when analyzing your risk tolerance.

1: Your investment time frame

This may be the most broad factor, but it has rung true for most investors. the main logic behind this is the more time you have to invest, the more amount of risk you can afford. Say an investment goes south while you are still relatively young. You have a greater amount of time to make up for this loss compared to a person a little older. However, like I said before, this is a very broad rule and further considerations are needed to decide which investment is right for you.

2: Your Risk Capital

The amount of money you actually have to …

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Clawing your way back

I thought it would be interesting to show a small table that outlines the issue with losing money, the figures below show what you have to ‘make back’ to get to break even depending on a certain amount lost.

Loss Return needed to regain original sum -5.00% 5.26% -10.00% 11.11% -20.00% 25.00% -30.00% 42.86% -35.00% 53.85% -40.00% 66.67% -50.00% 100.00%

It’s easy to see that it gets harder to get back to zero the further you fall, the most obvious example being that you need 100% growth to break-even if you lose 50%! Just something to keep in mind as you are investing or weighing up risk in the things you invest in.

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