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Friday, March 12, 2010

Understanding risk!

We are going to see today why investers invest and how they understand risk.. Investors invest to seek a good profit over and above this bad economy. (1) As almost investors arn't amply explained risk taking and it can impact then in either a positive or negetive way, they're dependent on the 'adviser' which is explained. Regrettably for the general investor there is low amount of help avialable
nigh advisers pass the simple qualifications but are still able to consult people on very complex subjects like investing .
The sure payoff you get from a profit bond is dependant on what an statistician tells you he is going to give you from the returns they are making. Any the dealt stock and with net are invested in virtually the same manner. A with net would like to be invested the same as a dealt store, but they are restricted because of the 'guarantees' or 'vague promises' they have to give to new policyholders, so frequently have to sell out of equities when they have already fallen, and buy them back after they have already risen. Disaster. With a supervised monetary fund you always know what your plan is worth, but with a with benefits plan, the statistician holds back your returns and gives them to you over the years. The thought is that they are said to protect you from downsides but that was discovered as nonsense the first time they were put under any sustained pressure. Think about it once again from its simplest form: A with profit bond cannot pay you out any more than the fund it's invested in performs, so by definition it has to underperform. The golden ticket they used to wave was the protected downside but when the market fell, with profit funds simply applied a market value reduction to reduce the value of your with profit bond back to what you would have received if you had a managed stock. So it's 'heads the insurance companies win, tails they win'. I'll bet you have never seen them marketed or explained like that.

Hope you know your risk now!


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