Risk vs Opportunity (FX,Equities)

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Understanding Risk vs Opportunity

Everybody wants maximum opportunity for profit, but what most people fail to properly consider is Risk.

When we look at different Markets, Key considerations that you have to look at is Risk Vs Opportunity for
Profit.

Finding the right balance between the two will give you an advantage.

What is EQUITIES:

When we talk about, Equities also know as stocks or shares.

They are all the same thing just with different names

When buying into an Equity, you are buying a portion of an actual company.

Sample: is when you buy a share in Apple. You actually own part of that company.

You can earn Money by owning a share in a company in two ways:

  • An Increase of Share Value (as it goes up)
  • Getting a Divedend from the companies profit.

What is FX:

When we talk about FX, Forex or Currencies. Three terms for the exact same thing

When buying and selling or trading in Currencies, you are only effectively trading the exchange rate between two
currencies.

FX rates will change over time, according to various factors:

  •  Import/Export
  •  Interest Rates of the Currency

Currencies are issued by The Central Bank, They print the money and Give it off to the major banks of the
nation.

What the Central bank does, is set an interest rate on a currency this is called “Central Bank Interest Rate”

As the Central bank decides to increase or decrease interest rates, That creates a whats called “Higher or Lower
Yeild” A fancy word for “Return” of your investment.

Putting money or accumulating savings is a form of Investment

As the Yield Increases or decreases according to the interest rate policies, The interest rate becomes more or
less attractive to investors.

Therefore thats why, Interest rate is one of the primary drivers of a currencies exchange rate.

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