Since you want to invest, it is accompanied by risks. In investment theory, "risk" can be interpreted as the possibility of difference between actual income and expected income, and of course it also includes the possibility of principal loss. Each investment tool involves different degrees of risk, which can be divided into market risk and non-market risk. Market risk refers to some risks that can affect the market, such as interest rate changes, tax cuts or economic recession. Non-market risk refers to the unique risk of a single investment project, such as a company's product problems that damage the company's profits, or strikes that hinder production.

Diversified investment in various assets

Market risk is inevitable for investors, which explains why a well-made and well-managed company's share price may also fall with the market situation when the market falls in an all-round way. Non-market risk is the unique risk of a single investment project, and investors can reduce the non-market risk by diversifying their investments. The so-called "diversified investment" means putting money into different types of assets.

In the past few years, the unusually hot stock market has caused many investors to have magnificent fantasies and expectations. Even in the face of the low tide of the stock market in recent years, many people still hope that the stock market will increase their assets rapidly, so they concentrate their assets on a certain stock. In fact, these investors have violated one of the most important principles of investment, that is, the principle of diversification. Taking the stock market as an example, the portfolio can include public stocks, real estate stocks, industrial stocks, banking stocks and so on. In order to establish a portfolio with low correlation coefficient, thus reducing risks; In addition, when the number of stocks invested increases, the risk of portfolio is relatively reduced. Simply put, if the funds are evenly distributed among 50 stocks, even if one of them goes bankrupt, the loss will only account for 2% of the total investment, which is much less than the loss suffered by investing in this bankrupt company alone. In a simple sentence, put the eggs in different baskets.

Funds invest in different markets.

In order to further diversify our investment, we can spread our funds in different markets, and the ups and downs of these markets will not happen at the same time.

Taking stock as an example, the factors that affect the stock price include the trend of international and local interest rates, the local and international economic development cycles, and the fiscal and monetary policies of local governments. The inconsistency between these markets reduces the correlation coefficient of each other's stock prices, which also explains why the volatility of international stock portfolios is lower than that of individual countries.

The fund portfolio is popular.

In recent years, portfolios managed by professional fund managers have become more and more popular in the market. It is a combination of various investment projects, including stocks, bonds and time deposits in different regions and industries. The fund manager completely controls the relationship between the composition and risk in the portfolio, so that the risk of a single investment project in the portfolio can be dispersed and minimized, while maintaining ideal returns. This is a good way to increase the value of assets.

However, it should be reminded that diversified investment can only reduce risks and cannot completely eliminate them.