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Understanding the concept of market risk

As most wealth management firms in India will tell you, systematic risk is the risk of the entire market. This can be thought of as the risk that affects all investments in the same way, or it can be considered as a general term for any type of market risk.

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Understanding the concept of market risk

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  1. Understanding the concept of market risk waterfieldadvisors.com

  2. Risk and returns Risk is an inherent part of investing, but it's also an important factor in determining returns. Returns are uncertain and can vary widely from one investment to another. Risk and return are closely related, but they're not the same thing—returns refer to the potential for profit or loss while risk refers to the uncertainty associated with those outcomes. Let us gain a more profound understanding of this. waterfieldadvisors.com

  3. Systematic risk As most wealth management firms in India will tell you, systematic risk is the risk of the entire market. This can be thought of as the risk that affects all investments in the same way, or it can be considered as a general term for any type of market risk. While systematic risks are not unique to common shares—they exist across all asset classes and markets—they do pose a challenge for investors who want to invest with certainty and confidence. waterfieldadvisors.com

  4. Unsystematic risk Unsystematic risk is the risk that an investor takes on when they invest in a particular asset. It is not correlated with the market and will not have any impact on the overall value of your portfolio. Unsystematic risks can be identified by looking at how much you have invested in each asset and calculating their correlation coefficient (CC) with each other. It is a complex process and may need an expert to help you with this. waterfieldadvisors.com

  5. Maximise tax efficiency Tax efficiency is important because it reduces your investment's risk and can help you maximize your returns. Investments that are tax-efficient are more likely to be profitable than those that are not, which means you may get a better return on investment. Tax-efficient investing also helps reduce the amount of tax you pay in relation to what you earn from investments and other income sources like salary or dividends from stocks or bonds. waterfieldadvisors.com

  6. Diversifying your portfolio The best wealth management firms in India will always recommend diversification. Diversification reduces the impact of individual risk factors on your portfolio, which means that it will not necessarily protect you from losses but may reduce them. There are two major types of diversification: asset allocation (which divides up investments between different assets) and financial instrument diversification (which includes more than one type of security). waterfieldadvisors.com

  7. Thank You… waterfieldadvisors.com

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