Risk Management

I believe risk management is a tool that will make you financially free. To elaborate further, risk management allows me to spend money without doubt as the capital I will be deploying will always be backed up by an asset in my portfolio.

There are multiple ways of risk management, the most common way used is to stay away from the equity market.😜 Life is a journey where we navigate through mitigating various risks that arise in our daily lives. Therefore, we can understand that risk management is necessary & is part of our mundane routine. Risk management is a crucial aspect of investing, as it involves identifying, assessing, and prioritizing potential risks in order to minimize their impact on the portfolio.

Risk is not only associated with investing, not investing also leads to a lot of financial failures. Not opting for insurance (health/term) is a huge risk. Delaying your investing journey has an adverse effect on your quality of life. It is only when we throw around the term risk management & associate it with the things in our life of which we are less aware, we come to think of it as an alien process.

Following are some of the methods to mitigate risk

1. Term Insurance 
2. Health Insurance
3. Emergency Funds
4. Exit Strategies
5. Diversified Portfolio
• Equity (Shares, Index Funds, etc.)
• Debt (Bonds, Fixed Deposits, etc.)
• Gold
• Real Estate

Each type of investment will also have different risks associated with them. For example, equities will be subject to market risk, while bonds can be subject to interest rates.

Another term that gets thrown around with risk management is risk tolerance. If you can understand the nuances of risk tolerance & what your capability to take risks is, you can easily navigate the process of risk management. Risk tolerance is the ability of an individual to absorb the risk associated with investing.

Thus by taking a disciplined approach to risk management, investors can help to minimize the impact of potential risks on their portfolios and maximize their gains in the long term.