lesson 5 - managing investments and risk mitigation

Question 1

what are the factors influencing investment decisions?

Answer 1

• personal circumstances
• economic circumstances

Question 2

what personal circumstances can influence investment decisions?

Answer 2

health, job changes and income security

Question 3

what economic circumstances can influence investment decisions?

Answer 3

global markets, employment trends and security events

Question 4

how does understanding the economic cycle help investors?

Answer 4

it helps with timing investment entry and exit, though predicting exact peaks and troughs is difficult

Question 5

what is a common investment strategy during economic downturns?

Answer 5

shift from shares to bonds; reverse during economic recoveries

Question 6

what are the 4 risk mitigation strategies in investing?

Answer 6

1. avoid
2. reduce
3. manage
4. transfer

Question 7

avoid - risk mitigation strategy

Answer 7

stay out of high-risk areas

Question 8

reduce - risk mitigation strategy

Answer 8

diversify investments

Question 9

manage - risk mitigation strategy

Answer 9

monitor performance regularly

Question 10

transfer - risk mitigation strategy

Answer 10

use insurance or financial professionals

Question 11

what is the purpose of a risk matrix in investing?

Answer 11

to evaluate risk based on likelihood and consequences