Concentration risk while investing

Concentration risk is the risk which an investor faces while investing in only few assets and not diversifying enough. It can be concentration in a single asset class (e.g. – all equities or real estate) or single or few investments within one asset class (e.g. – buying just 2 stocks for entire portfolio!). If everything goes well, this concentration can be very good for you. But it requires things going wonderfully well for that asset class and your specific investments. But, as you think of placing concentrated bets … are you aware of the risk? What if the asset class/ investment you have been bullish upon, doesn’t do well? Here are some ways the concentration risk while investing can play out.

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Investment risk is everywhere

Investment risk and returns are often correlated. You might have heard this umpteen times. Higher the returns on offer, higher the risk. Some investments are riskier than others. Some investments are risk-free (or considered risk free – nothing may be completely risk free).

However, in pursuit of returns, we often overlook the risk. Little bit more awareness about risk can help set expectations right!

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Where are the stock markets headed for?

Where are the stock markets headed for? We all can make calculated guesses based upon our own understanding and observations. Some of us will probably be right. But nobody knows for sure where the stock markets are headed for.

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The risk in not investing in equities

While equities (including mutual funds) have historically given good returns in a long time horizon. they come with a risk. However, while there is a risk associated with investing in equities, there is a risk associated with not investing in equities also.What are the risks of not investing in equities?

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Capital protection or capital growth?

What is your purpose of investing – Most of the answers to this question can lead to one of the following – capital protection and capital growth. Which goal should you be chasing?

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PPF versus ELSS – Which is a better investment?

PPF or ELSS – Which is a better investment? – is a question in mind of many savers and/ or investors. While both these instruments are popular among people seeking tax exemption under Income Tax Section 80C, their objectives & eventual returns can be different. Before we begin, let’s try to understand each of these […]

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3 questions to ask before doing asset allocation

Different people can have different asset allocation strategies. And all these can be right at the same time. You need to choose the asset allocation strategy that best suits your needs. What are the different asset classes you can invest in? And what is the ideal asset allocation strategy?

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Why do people lose money in stock market?

Ownership of good quality stocks has often been associated with wealth creation and financial independence. There have been several people who have made a good amount of wealth via stock markets – by investing, staying invested or trading. At the same time, there are many more who have  failed to emulate them, or lost money […]

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What ROI you should be chasing while investing?

When you look around for investments, there is a glut – of investment products, of products packaged as investments and products masquerading as investments. However, when it comes to spending real money you need to have a right mix of investments. There is no one right approach towards investments, and there can be several approaches […]

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