Let me ask you one simple thing. Would you like to consider risk as an opportunity or rather an uncertainty? Do you think the so-called safe investments can also be risky? Which is better- Investing or Not Investing? Is Financial Planning risky or the risk is in not doing planning at all?
says that everything around you has some kind of risk factor in it. The medicines you take can have side-effects upon it or the sport you play may end up injuring you. So, can you avoid risk in your life? Certainly, not. You either have to manage it or transfer it. If the option of management or transfer doesn’t exist then you have to accept it and get ready for the consequences.
In this article we will have a look upon some types of risks present in the economy in general which gets ignored in financial management. The risks comprises of:
It is something which impacts the whole economy, country or even a broader group affecting each and every constituent of the same. This can also be termed as non-diversifiable risk.
This is a type of risks that impacts a specific section of the group- company, stock, security, e.g. Government raising taxes on tobacco will impact ITC in a major way, but not Pharma, Steel, cement companies. With proper diversification this risk can be managed well.
It is a fact that a rise in general prices impacts every company, household and even governments for that matter. High inflation results in high expenditure and also higher cost of production. The higher cost of production has a spiralling effect and further increase the prices of the final output.
It is a systematic risk that will impact each and every constituent of it. If market sentiments are weak, then all stocks even if under good management and stable and growing business gets affected.
This risk can also be termed as Exchange rate risk. As like stock markets, currency rates also get affected by various factors. The movement in the currency rates may also impact your investments if you have directly invested in the other country of your residence like NRIs do in India.
Taxes and Inflation can be considered as two holes in the pocket. High taxes directly impact your cash flow. But in personal finance, taxes can be managed with proper planning by taking advantage of available deductions and spreading of Income. Seeking out for tax-efficient investment products like Mutual Funds is a good idea.
The risks discussed above are not exhaustive. As we have discussed that there is some sort of risk in everything we do. You only need to understand and accept the risk which will help you figure out the way to manage it. The best solution can be consulting the professional financial experts of MoneyMindz, First Free Online Financial Advisors to get the convenient financial advice.
For more information visit www.moneymindz.com or give a missed call to 022-62116588.
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