By diversifying the portfolio across currencies, the investor can minimize losses and achieve increased investment returns.
The effectiveness of investing in different currencies is confirmed by research by JP Morgan. In 2017, the US dollar fell by 7% overall, and by almost 15% against the euro. As a result, the assets of companies outside the US market became more expensive. By the end of 2017, the MSCI All World ex-US index in dollar terms was far ahead of the S&P 500.
Conclusion: try to buy assets whose value is expressed in different currencies: this will give you additional insurance against falling prices.
Institutional
The activities of any line data package organization are associated with the risk of losses. This is facilitated by various factors: poor harvest, failure of suppliers to fulfill obligations, lawsuits, force majeure. No matter how stable the business may seem, you cannot invest all your savings in it.
Let's say you decide to buy shares in five companies. Over the course of the year, four of them are up 10%, and one is down 5%. Your total return is 7%. On the other hand, if you invested the entire amount in a loss-making enterprise, you would have made a fatal mistake.
Institutional risk diversification
Investing in various industries is profitable in the long term. Tying a portfolio to a specific sector increases the overall risk. Thus, when investing only in the gaming business, risks specific to this sector appear. To reduce them, you can, for example, include broad market shares in your portfolio.
The FinEx ETF homepages contain information on the distribution of funds by industry and the features of each fund.
Currently, a significant part of the international market belongs to the IT sector, but there is no guarantee that this will always be the case. At the beginning of the 20th century, the most profitable sector was the US railway transport, but if we had invested all our savings in this business, we would have lost almost all our wealth today.
Conclusion: Individual industries are as volatile as regional markets. When investing, one should not limit oneself to a single sector.
Species
In this case, the investor invests in enterprises related to various areas of the economy (production of raw materials, household goods, high technology, banking, housing and communal services, real estate, healthcare).
When a crisis occurs, it is unlikely that all industries will immediately become unprofitable.
Case: VT-metall