The reason people assume the risks of investing in the first place is the prospect of achieving a higher rate of return than is attainable in a risk free environmenti.e., an FDIC insured bank account. Risk comes in various forms, but the average investors primary concerns are credit and market risk particularly when it comes to investing for income. Credit risk involves the ability of corporations, government entities, and even individuals, to make good on their financial commitments; market risk refers to the certainty that there will be changes in the Market Value of the selected securities. We can minimize the former by selecting only high quality (investment grade) securities and the latter by diversifying properly, understanding that Market Value changes are normal, and by having a plan of action for dealing with such fluctuations. (What does the bank do to get the amount of interest it guarantees to depositors? What does it do in response to higher or lower market interest rate expectations?)
You dont have to be a professional Investment Manager to professionally manage your investment portfolio, but you do need to have a long term plan and know something about...
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