Investment Insecurities

by L. Massimo

Worried about risk vs. opportunity? Doesn't everyone need financial planning? Of course, otherwise it would be difficult to maintain a healthy lifestyle and money management would be hard to keep on track.

Planning the Life of Your Money
Doesn’t everyone need financial planning? Of course, otherwise it would be difficult to maintain a healthy lifestyle and money management would be hard to keep on track. Let’s say you’re making good money, but you don’t know how to save or invest it. You see many investment options, but are confused about which one is right for you. Not choosing the best option for yourself and your future could result in little to no return, profit, and earnings. In order to avoid this dilemma, various financial planning services can be utilized.
Ordinarily, financial planning is the process of money management, tax planning, budgeting, retirement/estate planning, insurance, and investment strategies. These services assist individuals and companies in changing their financial future during different transitions in their lives. Financial planning institutions suggest that you research various types of bonds, equities, funds etc., however, can provide better recommendations regarding banking solutions for savings and financial management.

Understanding Risks of Investing
Without an understanding of what risks are, investment planning is sort of "impractical." With an investment, a return/risk tradeoff always exists, meaning, the more you can accept the risk, greater potential return is compensation for your commitment to an unknown outcome. In general, with the increase in the level of risks, the return rate also needs to rise, and visa versa. Prior to discussing risks in detail, it is essential for new investors to know how to perceive, handle, and define risks in several ways.

The greatest way to handle risk is by avoiding the activity associated with the risk. Typical instance is the risk of injury while flying on an airplane. An individual can altogether avoid the risk by choosing not to fly. In the investment world, avoiding some risks are possible by investing in "risk free" investments. Normally, short term maturity U.S. government bonds equal risk free rates of returns, which is the best option for investors looking for quick and smart gains.

By taking risks, we don’t mean carelessness. There is a thin line between taking risks and being reckless. Risk taking involves comparing possible rewards with the measurable risk, then deciding if the odds of winning are more than the odds of losing. Being reckless simply means jumping in headfirst and wishing for the impossible that has the absolute potential to fail. In short, risk taking encompasses a sound assessment of the connection between risk/reward against the odds of winning, while being reckless is similar to jumping off a mountain, day dreaming about the fortune and fame you will get should you instantly be able to fly.

Remarkably, it is actually the risk takers who ultimately take lesser risk than risk-fearing individuals. Risk fearing individuals who buy stocks that have moved too often and too frequently end up losing money while risk takers who buy stocks at its bottom frequently end up with millions in their portfolios.