Discussing Money Creating Wealth
Under the provisions of Basel Banking Reforms, banks are required to maintain different types of tier capital with purpose of making banks more reliable and stable and lower the risks relating to various areas. The tier capital is categorized and explained as below
Tier 1 capital
Tier 1 capital is the core measure of a bank’s financial strength from a regulator’s point of view. It consists of the types of financial capital considered the most reliable and liquid, primarily equity.
Market risk is the risk of adverse deviation of the mark–to–market value of the trading portfolio, due to market movements, during the period required to liquidate the transactions. In simple words the market risk can be defined as the risk that is associated with the investment in form of realized returns being different to the expected return. The period of liquidation is critical to assess such adverse deviations. If it is longer, so do the deviations from the current market value.
Like all the other investment avenues, mutual funds too have investment risk. It is very important to maintain risk and return tradeoff when investing into mutual funds and calculating the returns. It is true that the risks on investments into the mutual funds are lower than the investment into the stocks directly. Because of this reason many investors tend to ignore the risk component while calculating the effective returns from the mutual funds.
Every investment decision has some pros and cons. And in any case it is not possible to avoid all the cons and have all the pros alone. Both the pros and cons travel together. So it becomes important to balance those pros and cons so that you are able to benefit most out the opportunities available to you.
When you are planning to invest a small sum of money, it is always difficult to decide to which financial instrument to invest as different instruments offer benefits and very few are good enough to get the maximum out of the money.
As an investor you are always worried of the risk that is associated with your investment. You know that to earn some profits from the investments you have to take some risks but still you are always worried about it. The investment risk refers to the risk that is associated with any investment. All the investments are subjected to some kinds of risks that arise because of many reasons. The investment risk can be decreased by following some rules and strategies but cannot be eliminated at all. To invest into any financial instrument the investors has to ignore some investment risks.
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