With the uncertainty and volatility in global markets and world economies, I am left wondering, “what poses the greatest investing risk to investors?”
When it comes to building and maintaining a profitable investment portfolio, investors understand the importance of limiting the dangers associated with risky investing strategies. The challenge for most novice investors is to determine which of their investment options pose the biggest threat, to the safety of their investment portfolio. With that being said, I have taken the liberty of offering my opinion, as to what I think the two greatest investing risks are to the investment community. Limiting your investment portfolio’s exposure to these two influencers, will certainly reduce the dangers and inspire a renewed confidence in investing.
The lack of political transparency, even in democratic societies, creates feelings of uneasiness and uncertainty; within the minds of international investors. The risk to stocks, bonds, currency and even real estate investments, comes from not knowing what a country’s political agenda will be in 10 to 20 years. Will inflation run wild? Will interest rates skyrocket? Will taxation become a serious burden? These are serious risks to a long-term investment strategy.
Although this does touch on Political Uncertainty, the fact that the global economy contributes to domestic growth makes it a risk that must be accounted for on its own, as well. Domestically all can be going well economically, but if there is trouble with international trade partners, GDP is at serious risk of decline. If businesses cannot export goods or import supplies, the stock market suffers and investors heavily burdened with stocks, are in danger of seeing their portfolios collapse. Not to mention the incumbent risk of high inflation and crippling interest rates.
It is expected that investors will encounter a measure of risk in a majority of investment offerings. Albeit, some more so than others. Luckily there are alternatives. In my investing experience, finding a low-risk investment that meets a portfolio’s evolving financial objectives, will require investors to move outside of traditional investments and embrace new opportunities and alternatives. Nowadays, many private investors are enjoying success in business ventures and peer lending for example, which are options that are seen as more transparent and less dangerous; making them much more manageable.