Risky Assets – Hello Matobers friends , business trips cannot be separated from financial activities. Good financial management is believed to make it easier for someone to achieve their business goals. No wonder this is often associated with the term risky assets.
Well-managed risky assets are believed to be able to save companies from losses and bankruptcy. Therefore, we need a deeper understanding of this terminology so that we can run our business well in the future. Below are some risky assets to watch out for.
The ongoing debate in running a business is not far from the issue of financial management to achieve business goals. A frequently discussed term referring to risky assets.
Risky assets are important factors that can affect the company’s operations in such a way that if left unchecked it will result in losses for the company. For that, we need to know more about this term. Before knowing the meaning of risky assets, let’s first know the meaning of assets.
Definition of Assets
Assets are assets, property and property that support business operations and can be exchanged for cash. All company assets refer to physical or non-physical resources acquired through transactions and are the result of past activities.
Assets can also be defined as assets of a business entity in the form of rights or goods acquired by the entity through past activities or transactions, which must be measured in monetary units. The two definitions above conclude that assets are resources that can be used to carry out various activities such as Operations, Financing and Investment.
The definition of assets includes various types of assets or assets owned by a company. This wealth may have existed from the beginning, or it may be the result of the company’s operations over a period of time. It can also be called an asset.
Because we know that anything that can be valued in money can be called an asset.
Assets, on the other hand, are usually used as a term to describe a title. As a business person, you often deal with financial reporting, so you should be familiar with the term.
It is said that a good company is a company that manages its assets well. This can be seen from how the company manages these assets to generate optimal returns .
Assets are assets that are not only stored. However, the company allows him to work for the benefit of the company. Of course, its management must be calculated and carried out carefully. One wrong step the company can lose its assets.
Definition of Risky Assets
First, of course, we will discuss the definition of a risky asset itself. Therefore, risky assets are assets or assets of a company whose returns are uncertain. This uncertainty is often associated with significant volatility or price fluctuations.
In banking, this volatility is caused by fluctuations in lending rates, credit quality, and possible risks in repayment of fixed assets. On the other hand, price fluctuations can occur due to lower interest rates, higher payment risks and lower credit quality.
One of the high risk assets is cryptocurrency . Behind the high risk there are many equivalent benefits. No wonder some people invest in risky assets for profit.
Risk assets can be described as assets, or assets, owned by a company whose returns are uncertain. Professionals generally associate risk assets with those that exhibit a significant degree of price volatility, such as stocks, commodities, high yield bonds, real estate and currencies.
In the banking and financial sector, risky assets include assets whose value often fluctuates due to changes in interest rates, creditworthiness, payment risk, and other factors. This is described as high risk due to the uncertainty of the return that will be achieved in the future.
For example, an investor buys Gojek shares currently and plans to hold those shares for one year. At the time of purchase, we will not understand the return.
Therefore, the return on investment, or return on investment , is determined by Gojek’s share price for the following year and the value of the dividend for that year. This shows that stocks are a risky investment.
This includes securities (bonds) issued by the government that are classified as risky assets. For example, in the case of a bond with a maturity of 30 years, the investor cannot calculate the return that will be obtained by holding the stock.
Risk Asset Relations and Investment Portfolio
Each asset actually has a direct proportional relationship with the investment portfolio. In other words, as the value of your assets decreases, so does the value of your investment portfolio. As the value of these assets increases, so does the entire investment portfolio.
Some examples of financial instruments that are classified as high-risk assets include cryptocurrencies, mutual funds, stocks, bonds, foreign exchange, and publicly traded products.
Among all these products, cryptocurrency is one of the newest and highly demanded by the general public. An example of a high-impact cryptocurrency product is Bitcoin. If the Bitcoin price spikes, the prices of most cryptocurrency products will follow suit or increase rapidly.
In fact, investors jump into the world of cryptocurrencies because they want to make quick profits. Please understand that cryptocurrency prices can change at any time. Coupled with a 24-hour market, investors have more flexibility in redistributing their capital.
However, you should be aware that a fast return on investment comes with a large amount of risk. A price drop that is severe enough to automatically erase the profits previously earned. In the end, this led to undue worry and speculation.
Additionally, a portfolio is defined as a collection of financial investments, including stocks, bonds, commodities, mutual funds, cash, cash equivalents and all listed assets, and most recently cryptocurrencies.
The impact of risky assets can be seen during periods of fluctuating fluctuations in the value of cryptocurrencies i.e. fluctuations in market conditions. At that time, the cryptocurrency market was still following the rising price of Bitcoin.
If the price of Bitcoin rises, it will affect the state of the entire crypto market, which is experiencing a rapid surge. Most traditional financial institutions are immersed in the blockchain world that underlies the verification of cryptocurrency transactions .
Cryptocurrency startups are earning huge returns, and other interested investors want to get rich with their investment, but they haven’t been able to gauge the magnitude of the risk involved. Investor appetite is slowly attracting new investors.
Ultimately, this digital currency investment hype reaches a point where it risks a sudden and sharp decline. This situation led to a sharp drop in value, wiping out not only profits, but the entire value of some cryptocurrency investments.
The increasing debate about the regulatory potential of cryptocurrencies , coupled with concerns about excessive speculation, have contributed to the decline of this risky asset.
Types of Risky Assets
1. Cryptocurrencies
Many investors say cryptocurrency is one of the riskiest assets. The lack of a money-back guarantee due to a drop in the value of cryptocurrencies means that investors will lose some of the profits they might receive if the cryptocurrency goes up in value.
Cryptocurrency profits or losses are highly dependent on the value of Bitcoin and global economic conditions. Negative news can cause cryptocurrency prices to plummet, resulting in losses for investors.
Before investing in cryptocurrencies , it is important to consider the amount of capital you are investing. Make sure your capital is money that you are willing to lose considering that total cryptocurrency losses can be up to 90% of your capital. Without this readiness, cryptocurrency is not a suitable financial instrument.
However, with production limited to 21 million copies from the start, its value has increased over time. Therefore, the existence of Bitcoin ( cryptocurrency) is not only a medium of exchange, but also an investment, just like any other currency. According to Luno.com in 2012, 1 Bitcoin (BTC) is worth IDR 80,000.
However, at the start of 2020, one bitcoin exceeded 115,597,500 rupees! Bitcoin is known as digital gold, and with its value continuing to soar, it’s no wonder that Bitcoin is an investment choice.
But despite its dramatic rise in value, Bitcoin carries significant risks. Performance is highly volatile and unpredictable, and can suddenly crash overnight. If you decide to invest in Bitcoin, study all Bitcoins carefully and fully understand the risks.
2. Stocks
After cryptocurrencies , there are stocks that are included in the list of risk assets. The success or failure of an investor in stock investment is highly dependent on their knowledge and skills in analyzing market conditions.
This is because investors can use this analysis to determine whether the price of a stock will increase or decrease.
In addition to price volatility, the risk of playing stocks is whether they will pay dividends to investors each year. Dividend payments are based on the company’s performance for one year.
Therefore, to predict the risk of losing large amounts of money, the degree of risk and reward must be considered as closely as possible.
Shares are securities that represent the ownership of a company or entity. Therefore, when you buy shares in PT Maju Makmur Tbk, you are registered as a private investor and as a co-owner of the company.
Stocks have long been the favorite tool of profit seekers around the world. This is because the benefits of investing in stocks are endless. Thus, the risk of investing in stocks increases. Stock price movements tend to fluctuate, so choosing it to support short-term financial goals is not right.
Equity Investing Stocks
Equity is an option for achieving long-term financial goals of 10+ years. Long-term investments are also affordable to start investing in stocks. You can buy a minimum of 1 lot (100 shares) of shares on the Indonesia Stock Exchange (IDX).
So, for shares priced at IDR 1,000 per share, you can get 1 share slot by spending only IDR 100,000. Long-term equity investment strategies you can use are value investing, growth investing, or stock savings.
However, experts explain that equity is included as the riskiest asset class. No guarantees are given and the money that investors give to the company depends on the success or failure of the company in a competitive market.
Profits and dividends paid to investors also depend on the company’s financial situation. Capital owners must be able to achieve a balance between the level of risk and the rate of return on capital. The bigger the win, the higher the risk of losing money.
3. Equity Mutual Funds
Equity mutual funds are a type of high-risk investment asset. Equity funds, on the other hand, also have the prospect of higher profits and returns. Due to its high risk, this investment product is suitable for supporting long-term financial goals of 5 years or more.
You may consider supporting financial goals such as retirement funds, school fees for your future children.
What are Mutual Funds? A mutual fund is basically a pool that holds pools of funds from various investors, with the fund managed by an investment manager and rotating underlying assets such as stocks and bonds.
Therefore, an equity fund means that the investor’s money is invested in assets in the form of shares. Performance benchmarks for equity funds usually refer to equity indexes such as the Composite Stock Index (IHSG) or Sector Equity Index, depending on the characteristics of the selected equity fund.
Equity mutual funds are inexpensive to invest in. Today, you can invest from as little as IDR 100,000 in this high-risk instrument. Oh yes, stock fund return growth can be 20% or more per year. However, when stock market conditions are bad, the performance can also be negative.
4. Peer to Peer Lending (P2P Lending)
This is a new investment method that has become a hit since the advent of financial technology applications. Investing in P2P lending means acting as a lender or as a lender to institutions or individuals who need loans.
The loan financing process is made easy with the P2P loan market. The return on P2P lending investment is very high and can reach 20% per year. However, the average investment or credit term is available for the short term, up to 3 or 6 months.
Investing in P2P lending is very risky and has great potential returns. When you become a lender, the money you borrow can be completely lost if the borrower cannot return it.
This is also called default. By choosing a P2P lending marketplace that uses a trusted rating system, you can minimize the risk of investing in P2P lending. Also, choose a loan with reliable collateral, such as invoice guarantees for large businesses.
We also diversify our lending so that the risk of loss is spread out and minimized. Here are four risky investment asset opportunities suitable for young people that you can consider.
To manage your risk of loss, stick to the principle “Don’t put all your eggs in one basket.” Be careful not to put them in one basket. Spread your investments across different instruments with different levels of risk so you can better manage your risk of loss.
5.Real Estate
The financial crisis of 2008 may have revealed that real estate is not always worth its value. This means that real estate carries additional risks that other types of assets do not. Consideration of environmental risk and maintenance costs when investing in real estate must be commensurate with the potential returns.
Real estate , long considered safer than stocks, took a nosedive in the late 2000s when real estate was valued in many parts of the United States. Like stocks, real estate is not guaranteed.
Risky assets must be managed appropriately to reduce the adverse effects of changes in the value of income. The risk of changes in interest rates and economic conditions can affect the price at the time of trading. Risky assets include equities, commodities, high yield bonds, real estate and currencies.
How to Reduce Losses from Risky Assets
Allocate capital appropriately
The first tip to remember to minimize losses when investing is to allocate capital properly across different assets. For example, diversify your investments in cryptocurrencies, stocks and gold. Whatever product you think is the most suitable, the important thing is don’t put money into the investment.
Even if one asset is not profitable, there are other assets that are profitable. Any losses incurred can therefore be offset by various gains from other assets. The financial burden is automatically relieved.
Choosing the Right Assets
It is important to first identify your investment objectives in order to choose the right assets, especially when investing in risky assets. Because the financial market itself has various types of assets that can be obtained. There are stocks, mutual funds, bonds, and finally deposits. These assets offer returns with varying degrees of risk.
For assets with minimal risk, you can choose a deposit. However, for risky assets, you can choose stocks. Adjust your risk profile so you don’t make the wrong choice and accept losses later.
Be Calm When Your Assets Drop
An equally important tip is to stay calm when the asset falls. Understand that investing has its ups and downs. The win/loss ratio is usually even, so you won’t always win. Also, you don’t always lose.
Asset prices can bounce back when market sentiment turns positive, so it’s important to be patient in the event of a big loss. If you have excess capital, use the decline to buy another depreciating asset. If the price goes up, you can get the maximum profit.
Do not exaggerate
The biggest fear that many people have when investing is losing money. That’s why some people don’t want to invest because they don’t want to take the risk of losses that will occur. Although losing is normal as long as you can approach it aggressively rather than overdoing it.
Not exaggerating, I mean willing to borrow to get capital to invest. Continue to invest a reasonable portion of your money according to your financial situation. Don’t be afraid to miss your FOMO or train because there are many other advantages that you can get on various occasions.