Ultra-high-risk financial products, futures

 

Futures are very risky financial products.

The purpose of money management can be divided into asset protection and asset growth. Those who want to asset protection prefer safe assets. People who want to asset growth prefer risky assets. If the risk appetite is close to the risk-averse type, the focus will be on asset protection. If the risk appetite is close to the risk-seeking type, the focus will be on asset growth.

There is a difference between the risk-averse type and the risk-seeking type in terms of preferred financial products. First, risk-averse types prefer safe assets such as savings products. In the case of risk-seeking, risky assets such as funds and stocks are preferred. With the advent of the low interest rate period, individuals began to pay attention to high-yield products. They are subscribing to products like funds and stocks in anticipation of high returns.

There are high-risk financial products, futures. Funds and stocks are high-risk, high-return financial products. These products are called spot. However, there are cases where people are not satisfied with funds and stocks returns. Because they are interested in ultra-high returns that transcend high returns. Individual investors who dissatisfied with funds and stocks returns seek out ultra-high-risk, ultra-high-yield financial products, and eventually invest in ultra-high-risk financial product, futures.

Let's do a comparison between funds, stocks and futures. When comparing expected risk and expected return, if you compare expected risk first, the expected risk increases in the order of funds, stocks, and futures. Futures are ultra-high-risky products and can be relatively riskier than funds and stocks. When comparing expected returns, the expected returns increase in the order of funds, stocks, and futures. Futures are ultra-high-yield products, and you can expect relatively higher returns than funds and stocks. The result shows that futures are incomparable to funds and stocks in terms of risk and returns.

If you look at individual investors entering the futures market, they are obsessed with ultra-high returns. On the other hand, they are indifferent to ultra-high risk. They want to get rich quick. They have the illusion that they will can make huge amounts of money in a short period of time. They want to use leverage. They are imagining that it is possible to realize high profits with margin.

If we look at the path that individual investors enter the futures market, they may enter the futures market without experiencing the spot market and there are cases where they move from the spot market to the futures market. Both are dangerous, but the former is more dangerous than the latter.

Futures investment requires the establishment of safe trading principles. The safest way to invest in futures is not to invest from the beginning. There is a need for indifference to futures. However, if you enter the futures market, you will need to comply with the MDD (Maximum Draw-Down). Set the maximum loss amount (or loss ratio to margin)  for each investment period in advance. When the accumulated loss reaches the preset maximum loss, stop the trade. You can also use the loss ratio instead of the loss amount.

Money management vary according to risk appetite. Among the various financial products, you should choose the products that suit you according to your risk appetite. Among various financial products, there are futures, which are very ultra-high-risk financial products. Individual investors entering the futures market should focus on ultra-high risk rather than ultra-high return on futures. Futures investment requires the establishment of safe trading principles. Be sure to establish safe trading principles.