Risks and actions

RISKS:

Although the main risk of any investment is the loss of capital, it is convenient
to know what are the factors that can cause these losses and how to avoid
them. Similarly, it is vital to know that there are financial products in which
losses can exceed the money invested. They are derived and leveraged
products.

Understanding the real risks of an investment is key to limiting some of these

factors that cause disability. It is true that there are non-systematic (non-
market) risks that are only avoidable outside of it, but they are totally
unpredictable factors, such as the 9/11 attacks. In any case, the risk-benefit
scale is one of the main factors that we must take into account when investing.

Systematic risks are market (volatility due to economic data, politics, etc.),
price (factors that affect the supply and demand of the asset), commercial
(company results), inflation (growth below prices), interest rates (increases or
decreases in the official price of money), liquidity (lack of buyers and / or
sellers of the asset) or legislative (laws that affect the company or the
sector).

ACTIONS:

It is one of the parts in which capital is divided into a corporation.

Shares are the equal parts in which the share capital of a corporation is
divided. These parts are owned by a person, who receives the name of
shareholder, and represent the property that the person has of the company,
that is, the percentage of the company that belongs to the shareholder.

Owning shares of a company confers legitimacy to the shareholder to demand

their rights and fulfill their obligations.

Among other rights we can mention: exercising the vote in the Shareholders'
Meeting, requesting information about the situation of the company or selling
the shares it owns.

Among other obligations, the shareholder will also have to bear the losses, if
during a period the company does not obtain good results.
Types of actions

Among the different types of actions that exist, we will talk about the most
common:

• Ordinary actions: These are normal actions.

• Preferred shares: In this class, the shareholders have a superior right to

collect the money derived from the acquisition of the same, even before
distributing dividends to the partners, if so decided.

• Non-voting shares: They grant the shareholder economic rights (the

collection of dividends) but not another type of right, such as voting on a
meeting.

The purchase of shares today

A few years ago, the acquisition of shares was considered reserved for large
estates, but in the last decade families are interested in this issue.

How do you know which company to invest in? Before investing in any company,
it is essential to make a study of that company, this means that we must look
at their accounts, specifically on losses, profits, balance sheets, cash flows,
etc.

It is also advisable to look at the figures beyond the last quarter. It is

possible that the latest earnings, or in general the latest news from the
company, are conditioned to some extraordinary event, such as an acquisition,
for example. In this case, the figures could be misleading.

With this recommendation we can get a clearer and more accurate picture of
where we are depositing our money. This previous reflection could be a
transcendental factor for our investment to be a success.

Are there different types of shares and investment products?

Stock Shares: It is the best known investment modality and, usually, the first
one with which the beginner investor usually makes contact.

Stock indexes: Actually, it is a variant of the previous type. However, I

preferred to put it separately because investment in indexes usually attract
more qualified investors than in the case of stocks.
Currency: Investment in currency pairs (such as Euro / Dollar, Dollar / Yen or
Pound / Dollar) is usually made through Forex broker platforms, although it
can also be done through other financial derivatives such as Futures, Options,
CFD or Warrants.

Metals: This is an interesting type of investment since more experienced

investors often use it as a hedge of the operations on the Stock Exchange (as
is the case, for example, in the Investment Strategy in the Stock Exchange
and Metals). Obviously, the kings in this section are Gold and Silver.

Raw Materials: This is a group that allows us to invest in a wide variety of

financial assets.

Energy: Actually, it is also a type of investment in raw materials.

Bonds: This is a type of investment in Fixed Income where the investor

delivers long-term capital (for example, 10 years or 20 years) and, in return,
Receive an annual coupon of a predefined fixed return. The Bonds can be
public (state) or private companies.

What is the risk? The risks of investing in the stock exchange are the
following:

• If one does not have enough analysis, whether due to ignorance or

abandonment, there may be the possibility of investing at the wrong time, and
maximizing losses instead of minimizing them.

• These are investments that require considerable time to see profits

(especially if it is small capital, where fixed costs absorb this concept), so the
investment horizon is long term.

• Although the risk can be minimized, it will never be decreasing 100%,

because market risk cannot be mitigated.

• Although the stock market is regulated, there is a possibility that the

legislative branch may enact laws that may benefit the development of our
investments.

• While the money is in the capital market, the provision will not be immediate
of the flows, so there is a risk that we will have an emergency and not be able
to use the flows at the moment (called liquidity risk).
Is the risk involved when investing in stocks? Yes, because you may be
threatened to lose your capital.

Can you minimize the risk of my investment?

The objective of an investor should be to look for those investments where

the risk is the minimum; Although, generally, when an investment presents a
minimum risk, the profitability it offers is also minimal, and, on the contrary,
the greater the risk it presents, the greater the profitability it offers.

However, even if an investment offers a high return, we can always try to

minimize its risk; Let's look at some ways on how to achieve this: Train well,
Collect information about an investment, Analyze an investment well.