Diversification (Diversification) capital.
When managing capital, there are many ways to protect against the possible risks, one of the most effective options is to diversify the means of distribution.
Diversification of capital – is the rational allocation of the entire amount of the available funds between investment choices. This takes into account not only the profitability of investment objects, but also the level of risk of such investments.
The main objective of diversification of capital lies in the fact that to protect the investor from a complete loss of funds as a result of unforeseen events. In order to more fully understand the meaning of this term, we consider two areas of application – forex and investment.
Diversification of capital in relation to forex trading.
The basic rule of money management says – “You can not put all your eggs in one basket” because of this principle, and we should proceed by controlling means in forex trading.
• To do this, do not make the trade at a trader terminal through a greater amount of money than is necessary for the implementation of trade. Yes, some brokers offer fairly competitive rate of interest for the unused funds, but you run the risk of losing everything.
• Where possible, better to open two small accounts with different brokers, than one big one brokerage company.
• Permanent withdrawal of profits – just decide on what amount of money you are trading, and extra money transferred to another account or displays outside the company.
• When working on the asset management system, as well distribute their funds between the two, control.
Diversification when investing.
When you select a source of investment, first we define the two most important indicators – the risk and profitability of investment.
Investments in precious metals – the possible profitability of approximately 5-10% per year, the risk is minimal 1 to 10-point scale.
Investing in real estate – the yield from 5 to 10 percent, the risk of losing 1-2.
Deposit in the bank – 20% annual yield figure for the ten-point scale 2.
Investment funds – profits of 30-50 per cent, but a higher level of risk in the region 4.
Trust management on forex – a gain of 50 to 300 per cent per annum, the risk level 6-7.
Pyramid schemes – the profitability of investments to a few thousand a year, the risk is estimated as the maximum of 10 points.
That’s about the scale of assessment of the most common ways of investing. After that, you just have to correctly distribute (diversify) your existing amount.
Diversification takes place in the following way, the higher the risk of investment, the lower the amount of investment. For example, you can allocate their funds as follows:
Gold and deposits – 60% of the available money.
Investment funds – 30%.
Asset Management – 10%.
It is desirable that the objects for capital investment was not less than three.
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