Investing can be scary, not least because of the frequent use of words like risk and volatility. But these are just mechanisms to be explained and understood, just like anything else. If you understand them, you can harness them to your advantage. And that’s what I’m going to help you to do today.
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Risk, Volatility and Timescale
Last week I said that one of the differences between saving and investing is risk. Money saved in a bank account is essentially risk-free. You know that the money will always be there, unless the bank itself goes under, which doesn’t happen that often. Investments, by contrast, have converted cash into real assets like shares, bonds, gold and property. Those things always carry an element of risk, and we need to understand how this works so that we can make the most of the opportunities which always accompany risk…
So, as usual, let’s look at what you need to KNOW first, then what you need to DO…
In this session, you'll discover:
- The four main risks when it comes to investing
- Why volatility is not the same as risk
- Why you should be very wary of averages
- Why timescale is a key factor when deciding risks
- How to smooth out risk (to some degree) with cost-averaging
- The three key methods for managing risk
Resources mentioned in this week's show
Podcast: Why Invest?
And here's the graphic from Carl Richards illustrating the futility of trying to time the market:
Free email course – Learn How To Invest
And of course, there is a full transcript available by clicking the big blue button below:
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