The Securities and Commodities Authority (SCA) reported three types of investors in the financial markets: the conservative investor, the risk investor and the moderate investor.
The Authority identified five commercial risks that investors may face while investing their money in financial markets. The investor's advice is to diversify investments, ie, to distribute funds on a number of investment instruments and channels, instead of investing them all in one company or field.
Types of investors
In detail, the Securities and Commodities Authority (SCA) revealed three types of investors in the capital markets: conservative investor, investor risk, and moderate investor.
"The investor is a conservative investor who does not want to take large risks and is willing to make small gains and profits. The risk investor is willing to take a high degree of risk, In order to achieve many profits and gains, while the «moderate investor» that wants to carry an average amount of risk, in order to achieve an average of profits and gains.
"To know which type of investor you are, you can try a simple test by answering the following question: Imagine that you put your money into a high-yielding investment but surrounded by a high degree of investment risk, To relax and sleep deeply? "
"If your answer is yes, you are a risk investor, and if your answer is no, you are a conservative investor,
While the answer (to some extent), you are a moderate investor ».
Commercial risks
According to «Securities», there are a number of commercial risks, which may be exposed to the investor, while investing money in the financial markets, the most important of which:
Basic love
This kind of risk exists in all types of investments, namely, the risks related to the company's internal affairs, how they are managed and the competition.
The Commission pointed out that the best way to reduce these risks, is through "diversification", meaning investment in many companies instead of one company, according to the common saying: "Do not put eggs in one basket."
Market risk
This type of risk relates to the extent to which economic conditions affect the performance of the company such as inflation, unemployment and other political and social conditions. If, for example, the state issues a decision to stop construction and construction projects, for example, Reinforcement.
Interest rate risk
These risks affect the bond market more than their impact on the stock market.
For the bond market: if market interest rates rise, the new bonds issued at the new interest rate become more attractive to investors who wish to invest their money in the bond market, and hence the lower prices of existing bonds with lower interest rates due to lower returns , Compared to bonds issued at the new interest rate.
As for the stock market: if the interest rate on deposits in banks, investors will sell their shares, and deposit their money as deposits to banks, and this of course will increase the quantities offered for sale of shares on the quantities required to purchase, leading to lower prices in the stock market.
Inflation risks
Inflation may occur in a market such as the real estate market. In this case, investors find that real estate prices are higher than their share price rises, in which case investors sell their shares and buy real estate to benefit from higher prices. This in turn leads to a decline in stock prices.
Liquidity risk
These are the risks associated with the investor's inability to sell his shares or bonds and convert them into cash when he needs money, as a result of the absence of an application.
Diversification of investments
The Commission pointed to the importance of diversification of investments, and is intended to distribute funds on a number of investment tools and channels, rather than invest them all in one company or field.
The diversification policy depends on the distribution of investments on a variety of securities, such as stocks, bonds, and investment fund documents. As well as diversification within each group, for example, can diversify within the group of shares, so that the distribution of funds invested through the purchase of shares from various economic sectors.
To maximize the benefit of diversification, high risk equities and low risk stocks must be combined.
The utility of diversification
As for the diversification of investment, the SCA says the answer to this question is very simple. Imagine, for example, that you invest your money in a number of different companies' shares, and the price of one of these shares falls, while at the same time the share price rises. The rise in compensation for the decline in the value of your investments, due to the decline in the price of the first share.
Reduce the amount of risk
The Securities and Commodities Authority (SCA) asserts that if the investor praises the policy of diversifying his investments, he will be able to reduce the amount of risk to which he is exposed and thus increase the chances of compensating any losses in a security by the gain on other securities.
Although diversification advice is advised, the TRA warns against diversification too much to monitor the performance of all these investments.