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Investing, what are the risks?
By definition, a notion of risk is inherent to investing, which is more or less significant depending on your profile, your situation and your objectives. How are risks assessed and controlled?
Play the video : What's the point of building securities portfolio?
What's the point of building securities portfolio?
Explanations by Philippe Ledent, Senior Economist at ING Belgium.
What you need to know to build a real estate portfolio.
Philippe Ledent – Senior Economist – ING
Part 1 - Why build a securities portfolio?
Building a securities portfolio means dealing with one element: risk. Return is one thing. We all have return expectations. But on the other hand, we know that when you invest in securities, there are risks.
Obviously, the aim is to reduce risk; we can never eliminate it. We're talking about the financial markets, so there's always risk, but you still have to try to limit it.
And so, building a portfolio is precisely the way to deal with this dimension of risk and try to limit it.
We know, for example, that if you have a certain amount of money and invest it in a single financial product, you're bound to have a risk linked to that financial value.
If you multiply the financial assets, you'll diversify the risk, and reduce the portfolio's total risk.
So, building a portfolio is a fairly technical matter. It's best to seek advice, because the portfolio really needs to reflect your return expectations, of course. Eventually, moreover, also expectations in terms of income and liquidity, but also expectations in terms of risk.
And the portfolio will serve precisely to limit risk as much as possible by diversifying it.
Play the video : What should be looked out for when investing in a security?
What should be looked out for when investing in a security?
Explanations by Philippe Ledent, Senior Economist at ING Belgium.
What you need to know to build a real estate portfolio.
Philippe Ledent – Senior Economist – ING
Part 3 - What should you look for when investing in a stock?
Of course, you must pay attention to the classics.
If I've invested in a company's shares, it's best to know a little bit about the company: In which sectors is it active? What direction is management taking? How is it performing? What is the company's solidity and indebtedness?
Same thing if I'm buying corporate bonds: what is the company's debt situation? Will it be able to repay its debts in the future? The same goes for government bonds.
So, obviously, you must look at the investments you make. Once again, if you invest in funds, you can be a little more passive, because normally the asset manager, the one who makes the decisions, looks at what you, as an investor, should also be looking at.
But in relation to all these great classics, I would add one very important element: you must always make sure that your portfolio reflects your desire for return and risk.
And sometimes there are pitfalls. Sometimes you get the impression that if you invest in bonds, you're taking less risk than in equities. But there are bonds on the market today that are riskier than shares in very solid companies.
So sometimes you get the impression: "I'm comfortable, I've invested in bonds. And what's more, I realize that these bonds have a high yield". But you don't realize that if bonds have a high yield, it's precisely because they're risky bonds, from companies with a lot of debt.
And sometimes, it would be better to own shares in much stronger companies. So you always must watch out for the pitfalls in this area and always make sure that my portfolio reflects my desires in terms of return and what I'm prepared to risk.
But be very clear, and don't fall into the traps of the financial markets.
I've made up my mind, I'm going to take the plunge!
