Risk and profitability in investments25 сентября, 2021 от fake Выкл
«The quieter you go, the further you’ll get»
(C) folk wisdom
The simplest and most basic knowledge in the world of finance, which should be learned by any investor —
If I were given a task to prepare a novice investor to work in one minute — I would try to make sure that he learned that. He will not have time to understand more in one minute. But firmly having mastered only one of this truth — it will be ready for actions in the world of finance better than a huge number of people who have come to invest without knowing.
What will this understanding give him ???
A lot of things. It will avoid many options for the loss of money.
Of course, it’s clear that in one minute it is not possible to make a person with an intelligent investor.
But, as you can see, the firm assimilation of just one rule gives good results.
Unfortunately, very often later, in the course of the assimilation of many other financial information, this rule is the most important thing, basic, in finance — begins to forget a little to the investor.
Moreover, not just forget, but consciously ignored.
Investor, as he appeared of real experience, it seems that the balance of risk and profitability is not always proportional.
The investor seems to be now when he has become experienced and dexterous, it can find high-order investments that are not associated with high risk.
Here I would remember about beginner drivers. According to the statistics of traffic police and insurance companies, the most serious accidents wait for the driver not in the first days or months on the road. In these first days, he can confuse the pedals in a traffic jam and a slightly to remember the bumper neighbor. Or go to parking and scratch the wing. In short — nothing terrible in the first months does not happen. Because the driver is only afraid and he is attention! — Very careful. But it takes a year and a half or two. The driver begins to seem that he is already a real Schumacher, and in reality experience is still not enough. And here there are terrible accidents — with injuries and victims.
Also also an investor. While he is careful — everything goes well. But no wonder they speak
The investor begins to take on all big and large risks. And one beautiful (rather sad, of course) moment — detects that it carries losses.
What can be done in order to avoid these losses?
Understand that the risk / yield ratio is a basis. Axiom. Alpha and Omega investment. You will never deceive this ratio. Those optimists who tell how «safely» will speculate futures and get 20% per month — resemble engineers, with the enthusiasm of the eternal engine developing.
Understand the risks of different types:
A) the risks inherent in the financial instrument itself
B) additional risks associated with your financial or life situation
Have a clear gradation of the security of financial instruments.
And so on, the list can be continued to «garbage bonds» and the shares of the third echelon. Each time an investor who accepts more risk is counting on a greater return. But not always getting it.
Apotheosis demonstrating the Risk / Reliability ratio — venture investment.
Companies that they are professionally engaged in investing money in a dozen other interesting and promising start-up / development / startups. Of the ten startups — five completely go. The money invested in them is completely lost. Of the remaining five — three startups, neither Shaktko nor Valko will refund the money invested in them. But the remaining two will bring ten- or twenty-five profits. This is such a visual demonstration of the principle of «Risk of Risk.»
If we talk about my own relevance to risk — I try to minimize it wisely. What is meant by the word «reasonable»?
I’m trying not to give fear to make me poorer.
A simple example. If you store money in the form of cash under the mattress — it is completely safe in terms of the inability to lose them on bad investments. But this is guaranteed inflation losses.
Similarly, with a deposit. Agree to the «safe» and «guaranteed» deposit — this is for me to agree to the guaranteed loss — because inflation will be tolding savings.
Similarly, bonds were thrown — an unpredictable risk of high inflation makes them a tool that does not fit me.
Thus, for myself, I determined the acceptable balance of risk and profitability in the form of investments in the shares of large and profitable companies. Preferably — paying dividends.
For me, this is quite reliable and quite profitable.
Peter Lynch advises not to get involved in fashionable companies in fashionable sectors of the market — it emphasizes that in the long time intervals of investments in calm (non-high) market sectors, but in profitable and reliable companies give a greater effect.
However, the admissibility of risk levels each determines for itself. Acceptability depends on a million reasons: from the age of the investor, from the amount of capital, from the presence of a family (first of all — dependents on your responsibility), from the reliability of your nervous system.
For someone, Virgin Galaxy is an excellent company, which opens up hopes for fast enrichment. Someone is ready to wait for another 20 years when ozone will receive the first profit. Someone believes that P / E 1000 in the shares of the Tesla — it was not the limit.
Well, for someone — and invest 100% of their savings in the share of Sberbank and Gazprom seems too much risk. And he would prefer old good OFZ.
The main thing is that the risks of his money, who got him most likely not so easily, man understood what he was doing.
If you buy Virgin Galaktik — then you made a risky bet. And losing a significant part of the deposit should not scold Sir Branson — he is not guilty that you chose a risky investment strategy.
And if I decided to invest in Sber, it’s calmly and with pleasure my 6-7% of dividends and do not envy those who earned 50% in a week. After all, they could lose them for a week.
All I write is only thoughts out loud and does not contain any investment recommendations.
Everyone is the president of his investment fund himself, as I like to repeat. But still advise everyone to look at the statement of Peter Lynch, listed in the article and on the epigraph. It seems to me that it can help become