FINANCE

Money Management



Money Management

When investing, the first thing to do is evaluate the rate of return, time and amount of the placement. On the other han, one should also look at what type of entity will take care of the money , where you reinvest and look forward to the daily news on the underlying assets or investments that we place. When thinking about investing, one must be clear what the actual capacity of savings and determine the objective and time horizon to consider using that money.

However, we must know beforehand that there is a key factor that can break with any expectation an independence have. This feature of the personality, risk tolerance is defined as the degree of volatility that a person who invests can withstand changes in markets and what risks you are willing to take and which to reject. Before making the decision to invest, one must bear in mind that not everyone is equal. Many think of putting money in the long term, yet there is no tolerance for risk and volatility can occur, where one can act improperly, and failing to first order placement. To avoid mistakes, or indeed, to commit minor mistakes as possible, before investing you must know your risk profile, in this way, the result will be achieved in accordance with expectations, or at least be near them.

For investing decisions, the investment profile is necessary. The investment profile considers the Age, current financial situation, objectives, Investment horizon, Need for liquidity, Performance Expectations and Risk Tolerance. Risk Profile varies from person to person. It can never be the same for everyone. It is affected by the point of career at which an individual at the moment is. It can also be influenced by the knowledge the individual has regarding the investment, i.e. if an individual is experienced investor or a novice. The profitability and risk are directly related. Risk and return are two sides of the same coin. The more risk one decide to take, one can expect higher returns on their investments, but the loss can be equally great. Risk tolerance depends on the personal situation, horizon and investment objectives. One can limit the risk by diversifying into different types of investment. One should do the investment that best suits the individual's goals and is according to the risk tolerance level.

There are three types of investor profiles; Conservative, Moderate, and Aggressive. Each of them differ investment periods as short, medium and long term, respectively.

1. Conservative

The conservative investor is characterized by risk aversion. Rate for the safety and ensure the lowest possible risk to take, so one tend to prefer investments that report stable returns, low yield, but safe.These investors invest in the short and long term. Prefers safe investments that generate a fixed income such as debt instruments, deposits, savings accounts.

2. Moderate

The moderate investor tolerate moderate risk. These investors look out for good yields, but without taking too much risk. They aim to maintain a balance between performance and ...