In the world of mutual funds, pension funds and money market accounts one thing seems
to be on all the minds of investors and that is return on investment. This is just and in investor is certainly entitled to a dividend or return for a wise investment decision but often this desire for profit clouds a fundamental purpose of investment and that is capital preservation. Not satisfied with their mutual fund managers they often ask where are the profits.
This can put pressure on a financial manager to take higher risk for the short-term payoff. Even a manager who performs the best forex trading will come up the loser if he stays in the casino for too long. Risk management and capital preservation are two important aspects and duties of financial managers. Investors need to keep this in mind and weigh a managers lack of profits in relation to capital preservation. To win small and lose big can be initially encouraging and then downright devastating. In their search for higher long-term earnings and stock values, financial institutions must manage and balance five basic risks.
They are credit risk, interest rate risk, liquidity risk, foreign exchange risk and political risk. Each of these risks is related to the characteristics of the financial claim such as a term to maturity or to the issuer such as default risk. Each must be managed carefully to balance the trade off between future profitability and potential failure. There can be times where it would be wise to follow recommended forex trading tips and other times where it would not be prudent. A financial manager must safeguard your nest egg and that may mean forgoing short-term profits to provide a long-term viable investment strategy that will preserve your capital while providing a return on your investment but if you expect high payoffs at no risk then it would be best to educate yourself as to why such a scenario is elusive.