Knowledge and diversification

Now that you know what investments are and why it's so important to invest in your financial future, let's cover two very important topics that should be evaluated and followed before you start investing, as the lack of them can cause problems in the future, but with with their help, you have a better chance of prospering in your investor life.
We are, of course, talking about knowledge and diversification, which are increasingly present in the life of a successful investor, so let's go deeper into these matters.

The importance of habit

                  In Brazil, we know that financial education is not yet part of basic education for a large part of the population, which is why many are not in the habit of saving money, even less about investing. In these cases, a change in behavior is deemed necessary, but like any change, it is not so simple and takes time to get used to, but above all, it needs discipline and patience.  Financial education is, in part, about planning and taking precautions for the future by saving money and consuming moderately, thus controlling your cost of living and enabling you to save more money. But to check this level, first it is necessary to have knowledge about the subject, read books, articles, watch videos and, of course, practice for a while, because practice makes perfect. A simple excel spreadsheet like this can already help you.  Curiosity for content related to financial education can be a great advantage for those who are looking to improve their relationship with their money and seek financial freedom.  And finally, when your financial life is organized, it's time to start investing so your money can work for you, but before you start investing, it's important that you know your investor profile.

A brief definition of risk



            But before we talk about the investor profile, we have to open a parenthesis to define what it is to take risks in investments.

  “Risk” is often understood as a danger when we talk about investment for more lay people, but finance does not mean anything like that. To simplify, we can say that the greater the risk of an investment, the more its returns deviate from its average return, consequently, the expected return is greater.

According to Modern Portfolio Theory, which is the theory that works on the subject of how investors can build an investment portfolio with an "efficient frontier" that offers the maximum possible return expected for a given level of risk, the return and risk characteristics of an investment should not be seen alone, but rather how that investment affects the risk and return of your overall portfolio. Against this, the CEO of Maestri Investment Group LTD. Eduardo Bogosian, warns "risk is not a "pure" unit, we can only really assess risk when there is another investment as a comparison.

Read more about the definition of risk in finance in this blog post at Maestri Investment Group Ltd.

Investor profile

                  The investor profile can be summarized in which investment categories are most recommended for you and with that, what level of risk you are willing to take. Institutions that make investments usually do questionnaires to discover their investor profile and recommend the investments that fit their profile.

There are basically three investor profile classifications, each with its own characteristics, both in terms of yield and risk tolerance.

CONSERVATIVE

                  The CONSERVATOR profile is characterized by investors with strong risk aversion. Their investments are generally less risky, like most fixed income instruments.

Conservative investments are good for most of your medium-term goals, like home ownership or retirement (when it's closer), but they're also good for short-term goals, like your own car or a trip.

MODERATE

                  Investors with a MODERATE profile are those who admit a little more risk in their investments, usually focusing on the medium and long term. Investments such as private bond funds, real estate funds, among others, can be part of that investor's investment portfolio.

BOLD / AGGRESSIVE

                  Investors with this profile may have most of their portfolio in high-risk assets with above-average variation. These are applications that have a higher return than more conservative investments, but knowledge, experience and a long investment horizon are necessary for them to be a conscious application. Among other bold investments are buying shares in small companies and investing in futures markets.

Diversification

                      Another important point when it comes to investments is diversification, citing billionaire Warren Buffet as "Don't put your eggs in one basket", and what that really means is, diversify your assets so you don't suffer from "bad times", and this applies even to your professional life.

  But let's talk about investment diversification. It is important to know how to apply this concept, for example, an investment portfolio considered diversified is when the investments that are part of it do not have a great correlation between their returns. They are usually composed of a mix of fixed income and variable income, but they can also be portfolios that only have variable income in several sectors, such as retail and transport, or energy and construction.

There are investments that are managed by competent managers who distribute the capital in different investments, such as multimarket investment funds, which invest this capital in different strategies defined by them. "These portfolios are usually seen as a step forward on the scale of investment sophistication."(InfoMoney, 2020), as one of the biggest advantages of investing in this type of fund is diversification.

  

Maestri Investment Group LTD. invests in multimarket investment funds with quality and experienced managers, focused on the medium and long term, for those who bear risks and for those who do not like to take risks, and most interestingly, the minimum investment amount is low. Visit www.investmaestri.com and learn more!

Conclusion

                 We already know that investments are diverse and have risks and returns, but what we learned from this article is that knowledge is essential before investing, not only knowing the types of investments, companies or properties, but also knowing the yourself and always looking to know more.

Another thing we learned is not to "bet" everything on one horse just so that we have a balanced and efficient investment portfolio, and we learned that risks are not the possibilities of losing money, but that they are characterized by the variation of returns on a certain asset, how much the lower the risk, the lower the return variation, and vice versa.

But don't worry, as knowledge and diversification are often learned and made a habit together, so invest your time in getting to know the market, listening to experts, reading about the subject whenever possible, and practicing all the time. Invest wisely.

Article by:

-Por Canal Ricos com Você

Sources:

Educação financeira. Minhas Economias. Disponível em: http://minhaseconomias.com.br/educacao-financeira. Acesso em: 03/02/2020.

Perfil de investidor: o que é e como descobrir o seu? Como Investir. Disponível em: https://comoinvestir.anbima.com.br/noticia/perfil-de-investidor/. Acesso em: 04/02/2020.

Consultas - Classificação setorial. B3. Disponível em: http://www.b3.com.br/pt_br/produtos-e-servicos/negociacao/renda-variavel/acoes/consultas/classificacao-setorial/. Acesso em: 04/02/2020.

Como investir em fundos multimercado: um guia completo para quem quer diversificar. InfoMoney. Disponível em: https://www.infomoney.com.br/guias/fundos-multimercados/. Acesso em: 04/02/2020.

Modern Portfolio Theory (MPT). Investopedia. Disponível em: https://www.investopedia.com/terms/m/modernportfoliotheory.asp. Acesso em: 07/02/2020.