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What risk are you taking for higher returns?

Low cash returns -> people seeking higher returns. Before making any investment, it is important to understand the risks.

When reviewing investments we review: 1. Expected return 2. risk adjusted return 3. risk of a short term loss or long term loss 4. key risks 5. diversification.

The ideal investment has a: 1. high expected return relative to comparable investments 2. high return relative to the risk being taken 3. a low risk of loss in the long term 4. one key risks measure is how the investment performed in previous market downturns (e.g. March 2020) 5. diversification is one way of managing risk.

A recent poor investment fund was the “M Core Fixed Income Notes” offered by Mayfair 101. This fund offered a 4.95% pa return. This high risk fixed interest investment is now in receivership and investors may lose their entire investment.

An example of a well managed fund is the MCP Master Income Fund offered by Metrics Capital Partners. The funds’ expected return was 4-5% pa in October 2018. It has delivered 5% pa for 3 ½ years with no loss of capital.