In investments, it is easy to encounter a variety of risks.

Volatility risk is the most common and inevitable.

However, volatility risk can be mitigated by buying low and holding for a longer period.

Some risks, on the other hand, are unnecessary for us to bear.

By acquiring certain investment knowledge, we can avoid them.

Let's take a look at some of the risks that have occurred in the past years and how to avoid them.1. P2P

There are two common types of risks associated with P2P lending.

• The first type involves the absence of a custodian mechanism, where P2P companies create their own funds pool, making it easier for investors' funds to be embezzled and the company to abscond with the money.

• The other type includes a custodian mechanism but invests in unreliable projects, leading to defaults.

Countermeasures:

P2P lending has essentially disappeared.

2. Leveraged Investing

Leveraged investing carries its own set of risks and requires careful consideration.In 2015, there was a type of fund, known as the Grade B fund, which became popular among investors due to its built-in leverage and similar entry threshold to general funds. It was extremely aggressive during bull markets. However, in bear markets, due to high leverage, it could lose the majority of its principal overnight.

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Structured funds are a good variety, but they are too complex for the average investor to grasp.

Countermeasures:

Avoid leveraged investments.

Structured funds have all been transformed, and Grade B funds have also disappeared.

Currently, public mutual funds investing in stocks are generally not allowed to use leverage.However, in private equity funds, there are still private equity funds that leverage investments in individual stocks.

In the past two years, there have also been many high-leverage private equity funds that have fallen to the point of liquidation.

Before investing, it is important to identify whether the private equity fund has increased leverage.

Stock investments themselves are highly volatile, and if leveraged investments are added, the risk is extremely high.

Ordinary investors should still avoid leveraged investments.

3. Virtual Currency

(Note: The original text seems to be cut off at the end, so the translation is incomplete.)Some virtual currencies, similar to early P2P systems, are designed with the intention of absconding with funds.

Response method: Do not engage.

4. Trading in silver futures, trading in crude oil futures

Although there are corresponding types of silver and crude oil futures, there are many fraudulent platforms on the market.

In fact, they do not have the corresponding futures qualifications and may have funds scammed away.

Response method:Futures investment is highly challenging, and it is better to avoid it if possible.

If you must invest, pay attention to verifying whether the other party has a legitimate futures license.

5. Unregulated financial products

A few years ago, a friend asked me about a situation where he had bought a house and become a property owner, and then received a financial product from the real estate company, offering an interest rate of 7%-10% as a benefit.

However, by this year, many of these types of products have defaulted.

In fact, many of these products are similar to the P2P model of the past:

- Some establish their own funds pool without a custodial account, allowing funds to be moved at will;Some are invested by real estate companies into unreliable projects, which may default in the future by not being able to recover the principal/interest.

Response method:

It is relatively easy to judge. Such wealth management products often claim a return rate that is far higher than the yield of the 10-year government bonds of the same period.

The yield of 10-year government bonds is currently around 2.7% in the A-share market.

If a project's return rate reaches twice or even higher than the yield of 10-year government bonds, it often comes with a huge risk of default.

6. Bond funds/trusts hit a mine

Funds and trusts are themselves regular financial products.However, in the last two years, some bond funds have stumbled upon junk bonds and encountered defaults.

Last year, there were even short-term bond funds that fell more than 10% in a single day.

Some trusts have similar issues, concentrating investments in a few bonds or projects, but they have encountered defaults, leading to the inability to recover principal and interest.

Response methods:

(1) Bonds are divided into interest rate bonds (e.g., government bonds) and credit bonds (e.g., corporate bonds, local government bonds).

The probability of default for interest rate bonds is extremely low, so one can opt for bond funds that are primarily focused on interest rate bonds;

Even when considering credit bonds, the focus should be on high-grade credit bonds.At the same time, manage your fund portfolio well, diversify your allocation, and reduce the impact of individual bonds.

(2) It is essential to understand where the investment is directed.

If the underlying investment instruments have unclear investment value and risk, do not engage with them.

In summary,

The aforementioned risks typically fall into several categories:

- Product system risks: For example, the absence of a custodian mechanism can lead to the risk of funds being misappropriated.Investment Risks in Different Assets: For example, investing in high-risk projects that are prone to default without diversifying the portfolio.

Investment Strategy Risks: For example, using leveraged investments.

These types of risks can be entirely mitigated by acquiring investment knowledge and taking precautions in advance.

This can reduce many unnecessary interruptions in investments.