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The RISK OF INVESTMENT PRODUCTS by Michael C. S. Wong download in pdf, ePub, iPad

Bottom Line WhileIf sold before maturity

If sold before maturity, the bond may be worth more or less than the face value. Bottom Line While in some cases these investment choices can provide lucrative returns, they are marred by different types of risks. Investors holding individual stocks for an extended period of time also face the risk that the company they are invested in could enter a state of permanent decline or go bankrupt.

Capital appreciation and income distribution are two standard classifications for investment products. The rationale behind this relationship is that investors willing to take on risky investments and potentially lose money should be rewarded for their risk.

To sell an older bond with a lower interest rate, you might have to sell it at a discount. Structured investment products can include mutual funds, exchange traded funds, money market funds, annuities and more.

Hedging buying a security to offset a potential loss on another investment and insurance can provide additional ways to manage risk. Modern portfolio theory suggests that an investor have a diversified portfolio of investments including a variety of investment products to obtain an optimal risk-return reward for their investments.