How the risk of interest rate can be managed or diversified when investing in emerging market?
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They would invest in a variety of markets, not just one, the risk would be hedged and spread among for example, Real Estate, Petroleum, Banking, Forestry, Bonds, Futures, this type of thing, the emerging markets that you mention are all thriving markets now, the volitility has more to do with inflation rather than interest rates. When a market is growing quickly as in the case of China which for 2007 forecasts almost double digit figures and Brazil forcasting 5% to 6% growth, the inflationary forces are what have to be controlled. Brazils elections were recently an eventful occaison but I did notice that the markets ( currency in particular) hardly flickered!  good sign of increased  stability really.
516200
Great question, I'll try to help you as comprehensively as I can.  The best advice I can give you is ignore the "hot" trends.  Hot trends just get you burned. Nobody can predict the stock market, if they say they can they're lying.  If they could, they wouldn't tell you, they'd make billions on their own.  \n\nSo, knowing that going in, knowing that we have no crystal ball, what's a sensible investor to do?\n\nBuy a diversified series of HIGH QUALITY, LOW EXPENSE mutual funds. One good piece of advice is that especially when just starting out, owning individual stocks is just way too risky. In many cases, it's more akin to gambling than investing. So go with mutual funds, which are much more diversified, and therefore spread the risk among many, many more holdings. The key, of course, is buying quality. So make sure you hit ALL the asset classes, like Large cap stocks, small/mid cap stocks, international stocks, emerging markets stocks, government debt, corporate debt, hi-yield debt, foreign debt, emerging markets debt, real estate, commodities, and precious metals. That's 12 categories right there, so with $1200, you're talking about $100 each. This is called asset allocation, and it's a step beyond simple "diversification", which most idiots think is buying a hardware tech stock AND a software tech stock.\n\nAdd systematically on a monthly basis. That means make sure you put the same amount of money in every month, no matter what.  Soon you won't even care what any of the markets are doing. They're up? Great! Some of my investments are worth more. They're down? Great! Now I'm buying quality investments at an "on sale" price.\n\nThen sit back and re-balance each year, back to your original percentages. Again, this is called asset allocation. It's is very important, perhaps the most important thing you can do with your money. The thinking being, what's BEEN hot is more than likely not going to STAY hot. All markets are cyclical. There's hundreds of years of data to back this up. Yet some people still think they can ride the next hot wave. They usually wind up begging on the street for beer money.\n\nNow, this sort of portfolio should average 8-12% per year, so just split the difference and say 10% on average. Will it do 10% EVERY year? Of course not. I'd be surprised if it EVER did EXACTLY 10%. That's an annual average. With that average, your money should double roughly every 7 years.\nSo, if you're starting with $1200 or so like I said in my example, then in 7 years , even if you added no more money, you should have about $2,400\nin 14 years you should have about $4,800\nin 21 years you should have about $9,600\nin 28 years you should have about $19,200\nin 35 years you should have about $38,400\nin 42 years you should have about $76,800\nin 49 years you should have about $153,600\nin 56 years you should have about $307,200\nin 63 years you should have about $614,400\nin 70 years you should have about $1,228,800!\n\nOf course, if you keep adding money in that $100 a month, you'll become a millionaire MUCH sooner. The key is discipline, and sticking in when markets are up OR down. Don't try to time the market--you'll NEVER get it right.\n\nBy the way, here's a handy formula:\n\n$100/month x 12% x 20 years = $100,000.\n\nSo if you need $300,000 in 20 years and have no idea how to get it, just save $300 a month and you're there. If you don't get 12%, you'll wind up with less naturally. But IF you still wind up with $250,000, I'd call that one hell of a failure.\n\nOh, and if you qualify on income limits (generally, if you're a single filer and make under $90,000/yr), and do this all in a Roth IRA? Then every penny will be 100% TAX-FREE. That's a deal that's too good to pass up. That's why I tell anyone who's under 30--if you make under $90,000, and therefore qualify to do
996240
By leaving your money idle in OA & SA you will accounts, you will be earning 2.5% and 4% returns.  But when you deduct the 2% inflation rate what you earn actually is 0.5% and 1.5%.  Instead you can invest and earn a good return.\n\nTo answer your second question is it risky?... depends on the product you choose.  Unless you take the risk you won't get the returns.  But how much risk you are taking is dependent on your capacity and risk profile.  A safe instrument will return a low return while a high risk investment may produce an high return.  For high risk investment, you should have the stomach to absorb the volatility.\n\nGood luck.
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That is like asking "why are we here" or "how do i measure volatility in options?"  It is a famous question which is examined in every finance class and probably will be till the end of time.\n\nAn excellent question. Some use expected return and combine it with likelihood of occurance, some use CAPM, which gets into diversifiable and nondiversifiable risk. Some use short time periods, others use longer periods. Some assume efficient market theory, some don't. There are many many ways to measure risk...ask 20 people, i am guessing you get 20 answers...each equally correct....
356050
Don't try to time the market.  There's a ton of money in the global financial market.  Just periodically invest by your asset allocation percentage.
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Commodities are very risky and in order to dissipate risk you will need a sizable portfolio. The safes and most strategic way is to diversify through Commodity based Mutual Funds or even better Exchange Traded Funds (ETFs). Check out ticker: DBC. Best of Luck
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If that's what you really think, then buy the Euro Currency Trust, which trades under symbol FXE.\n\nBut currencies are a risky game, trends could reverse tomorrow on one international event or the other.  A diversifed portfolio makes more sense, and is safer.  Be careful.\n\nHope this helps!\n--J.
152480
Risk Management is NOT about getting constant (i.e. low volatiliy) returns.\nRisk Management is NOT about getting risk with complete certainty.\n\nAs Mark Twain said: predicting is difficult, but it is more difficult to predict the future.\n\nRisk Management is about getting rich enough with as much uncertainty as you feel confortable with. \n\nThe first step towards risk management for pension funds is knowing the explicit or implied fund's liabilities:\nis it a defined benefit fund? then it's quite easy to determine the liabilities. \n\nIs it defined contribution? Then still the fund has, on behalf of the benefitial owners, liabilities to deal with, although they are not explicit and thus are more difficult to be sought after.\n\nYou should pursue two different (and at most times contrarian) objectives:\nfirst, maximize the expected surplus of the fund, AFTER the liabilities have been paid.\n\nSecond, minimize the VARIANCE of the difference between the liabilities and the assets plus the future contributions to the plan.\nThat is, you should, on hand \nmaximize e=(X-B)'E\nwhere X is the Asset Portfolio, B is the portfolio representing the future flows for the fund (i.e. contributions and withdrawals), E is a vector of expected returns for each asset or flow;\nand on the other hand\nminimize V=VAR{(X-B)'E}\n[Note: if X and B are deterministic and E is multinormal, then V= (X-B)'S(X-B) where S ithe covariance matrix for E]\n\nIt should be more than obvius that both function are ,generally speaking, not optimal in the same place. Thus, you need a PREFERENCE FUNCTION.\nIt's usual to have U=e-lV where l is the risk-aversion coefficient.\nDepending on how you model your assets and your flows, the function can turn out to be analytically treatable, or you might end up using some kind of simulation\n\nyou can look for more information at\nAIMR (American Insitute for Market Research)
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Find out the tecnical intermediate  or short term range of the Market , then choose a particular company you want to invest in \n*find out its PE ratio( safe if below 8 in most cases)\n* its earning per share\n* its dependence on foreign markets (genrally if a company  uses indigineously produced goods and its main market is within its own nation it is more safe)\n*its book value in comparison to its market Quotation \n*and finally its networth and capital valuation
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Basically, traditional investment advice ignores the impact of equity diversification on the reduction of risk. Correlation and volatility are persistent qualities of most well-managed mutual funds. Thus, the right mix of equity funds could be less volatile, and have more return, than a mix of bond and equity funds.\n\nThe tools to research this concept can be found in the free FastTrack trial at http://www.fasttrack.net
782479
1) The minimum investment in mf-mis is varied from amc to amc.If u want to invest in growth option the amount is arround Rs 10000/-.But if u want to invest in monthly dividend option the minimum amount is arround Rs25000/-.\n2) No the monthly dividend is not assured.It may fluctuate,may not pay every month.\n3)Very good question.This is as per your risk return appetite u should compare it which 1 is best for u.If u are a tax payer then mutual fund-mis is the best option for u.if u invest in growth option only long term capital gain tax is applicable to u.But if u invest in mly/qly/yly dividend option dividend is tax free in the hands of u but amc have to pay tax to government.So growth option is the best for absolute return.U may opt for systematic withdrawal plan.In the case of pomis it is assured @8% to u.but interest is fully taxable.
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Risks of Investing in Bonds\nAll investments offer a balance between risk and potential return. The risk is the chance that you will lose some or all the money you invest. The return is the money you stand to make on the investment.\n\nThe balance between risk and return varies by the type of investment, the entity that issues it, the state of the economy and the cycle of the securities markets. As a general rule, to earn the higher returns, you have to take greater risk. Conversely, the least risky investments also have the lowest returns.\n\nThe bond market is no exception to this rule. Bonds in general are considered less risky than stocks for several reasons:\n\nBonds carry the promise of their issuer to return the face value of the security to the holder at maturity; stocks have no such promise from their issuer. \nMost bonds pay investors a fixed rate of interest income that is also backed by a promise from the issuer. Stocks sometimes pay dividends, but their issuer has no obligation to make these payments to shareholders. \nHistorically the bond market has been less vulnerable to price swings or volatility than the stock market. \nThe average returns from bond investments have also been historically lower, if more stable, than average stock market returns.\n\nHigher Risks=Higher Yields\nA specific bond’s risk level is reflected in its yield, another name for return on a bond investment. “Current” yield is a function of the bond’s:\n\nCoupon rate: the annual interest rate the issuer promises to pay the investor, stated as a percentage of the bond’s face value or “par,” which is the amount the investor can expect to have returned on the bond’s maturity date. \nCurrent price, which may be a premium (more than) or discount (less than) in relation to the bond’s face or par value. \nYield-to-maturity reflects the relationship between the total coupon interest payments remaining between now and maturity, and the difference between today’s market value (price) and par value. Yield-to-call is the same calculation based on the total coupon interest payments remaining between now and the first call date (rather than the maturity date) as well as the difference between today’s market value (price) and the call price.\n\nThe higher the risk in a given bond, the higher its yield needs to be to compensate the investor for taking the risk. When the market perceives the yield on a bond to be too low, its price will fall to bring the yield in line with market expectations or prevailing interest rates.\n\nIt’s All Relative to “Riskless” Treasury Yields\nBonds issued by the U.S. Treasury are backed by the full faith and credit of the U.S. government and therefore considered to have no credit risk. The market for U.S. Treasury securities is also the most liquid in the world, meaning there are always investors willing to buy. U.S. Treasury yields will almost always be lower than other bonds with comparable maturities because they have the fewest risks.\n\nRelative yields—which may be discussed in terms of “spread” or difference in yield between a given bond and a “riskless” U.S. Treasury security with comparable maturity—vary with the type of bond, maturity date, the issuer and the economic cycle.\n\nCallable bonds are riskier than non-callable bonds, for example, and therefore offer a higher yield, particularly if the call date is soon and interest rates have declined since the bond was issued, making it more likely to be called.\n\nShort-term bonds with maturities of three years or less will usually have lower yields than long-term bonds with maturities of 10 years or more, which are more susceptible to interest rate risk. All bonds have more risk when interest rates are rising, but those with the lowest coupons stand to lose the most value.\n\nUnderstand the Risks Before You Invest\nBonds have a role to play in virtually every investor’s portfolio (See the article on Asset Allocation for more inf
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It depends on how much risk you want and how much you are hoping to gain. \n\nThe safest would be CDs. Check ingdirect.com, Their 18 month CDs are yielding about 4.5%\nhttp://home.ingdirect.com/products/products.asp?s=OrangeCD\n\nIf you are willing to take some risk you can invest it in mutual funds or even stocks. Investing in the market is more risky but can provide greater returns.
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The problem is the same with all investment.  There is the risk that you will lose some or all of your money.  Developing countries are especially high-risk in this regard because they frequently have political turmoil which could lead to the government (or pseudo-government) seizing/stealing your property.  Also, developing countries tend to have higher poverty and weak law enforcement, so your property is at risk for vandalism, destruction, or theft by criminals.\n\nThe solutions depend on how you actually plan to invest.  If you will be lending money to locals to establish a business, charge an appropriately high rate and do not put all of your money into one venture.  The rate must be high enough to offset your risk, but low enough to be affordable to your debtors.\n\nIf you intend to actually go into the country and establish a business, you must pay close attention to the security of your assets.  Do not expect the government to protect your property, and do not expect them to keep their word - even if it's in writing.  You must have adequate security to defend your property, and secrecy to hide as much as you can in case your defenses fail.\n\nIt is NOT easy to overcome those problems, which is why there is not more investment in developing countries.  It's really a bummer because investment and economic growth are precisely what are needed to stabilize the systems.
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I suggest stocks, mutual funds and ETFs.\n\nDrop me a line if you need more detailed information.
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On the one hand, you should stick with what you know.  On the other it may not be good to have all your money invested in the same place.  Of course you can diversify by putting money in the bank, like in CDs or money-market accounts.
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I've been investing a lot in foreign stocks.  Gold is obviously a great hedge against falling currency values, but it isn't a productive investment.  It may go up in price, but it doesn't grow in the way businesses can.  The same can be said for investing in foreign currencies.  You can hedge against the dollar with them, but there's no growth in currencies either.  \n\nIf you think it's only the dollar that will be falling (and not all currencies in a worldwide inflation), then investing overseas is the way to go.  And if you want to preserve the opportunity for growth in addition to simple hedging, buy stocks in those markets that you feel are safe.