As we all know, the world has been undergoing tremendous changes. It seems that just after one night, this world is full of innovative technologies, products, and services. Furthermore, clashes and conflicts in international trade and business are seen everywhere. In 2019, a lot of people have experienced huge losses just because the world is changing so fast that they can not figure out how the brand new business model works.
Now, we are offering 4 tips that can help you avoid investment risks in 2020. With this guideline in mind, you can have a good start at the beginning of this new year.
Tip 1: Keep an eye on the macro environment.
A lot of investment risks are closely related to the macroeconomy and state policy. Therefore, keep yourself informed, pay attention to the economic news and reports on the regulations and policies. All kinds of information can help you evaluate the probability of systematic risk and make preparations for them.
In particular, we should focus on some important indexes such as the GDP, the total scale of the M1, M2, M3, as well as the price index. These indexes can help you determine if the national economy works well.
Tip 2: Evaluate risks scientifically, do not go after the hot concepts mindlessly.
You must realize that every investment has risks. Putting risks under control means you must figure out how much losses you can accept at most.
Before making any investment decisions, you must ask yourself: behind this investment, do I know the risks? That may be caused by policy, the outside macro economy environment, or just some stake holder’s will.
Now, it’s time to review one sentence, as I quote from Warren Buffett, the first rule for investment is do not lose, the second rule is to remember the first rule…….’
Tip 3: Use the strategy of ‘scattered investment’.
Risk can be diluted if your investment is scattered. Ray Dalio, the founder of the ‘Bridge Water Fund’ once said:
A portfolio of highly correlated diversified investment targets does not reduce the risk, only an investment combination with zero or preferably negative correlation can effectively reduce risk.
Researches show that if you create a portfolio of 5 investment targets with low correlation can reduce the risk by more than 50%! Besides the low correlation, these 5 targets must be excellent in terms of business performance.
Tip4: Choose excellent ‘investment institutions’.
We must be realistic and accept that we are just normal people. Maybe it’s time to choose one professional institution to help you manage wealth. There are 3 reasons why we recommend them.
The first reason: Institutional investors are well informed and strong in evaluating risks.
They have various connections with government agencies, colleges, and other business partners.
It’s relatively easy for them to find the real investment opportunities.
The second reason: they have good behavior in investment.
An institutional investor is an economic entity with an independent legal person status, and its investment behavior is regulated in many ways. On the other hand, the institutional investors are self-disciplined, committed to protecting the interests of clients and their reputation.
The third reason: they evaluate and manage risk comprehensively.
They raise money through different channels from society. The first thing they should consider is safety. They are risk-averse. To put investment risk under control, institutional investors choose investment targets carefully. For them, predictability is sometimes more important than high returns.
With these 4 tips in your mind, you will have a good start at the beginning of this new year!