The goal of your investment strategy should be to achieve consistent positive returns. But how can you position your portfolio without understanding what factos put it at risk? There are 4 primary risks to your assets:
- Financial: When individual issuers of investments run into trouble, or are unable to live up to investor expectations.
- Market: Arises out of price fluctuations in the entire securities market or in an industry group.
- Interest Rate: The market prices of interest-sensitive securities tend to move in the opposite direction of interest rates.
- Inflation: Occurs when the market value of the security fails to keep pace witht he inflation rate, thus decreasing its value in real buying power.
There are ways to deal with these risks. For example, you could use the concept of Laddered Maturities to decrease your exposure to Interest Rate Risk…
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