Risk capital is a term that is applied to investment funds which are allocated to speculative activity. Risk capital is used for high-risk, high-reward investments such as junior mining i.e. exploration companies that look for new deposits of gold and other precious minerals, or emerging biotechnology stocks for example. Risk capital can either earn spectacular returns over a period of time, or may erode to a fraction of the initial amount invested if several ventures prove unsuccessful. For this reason, diversification is key for the successful investment of risk capital. Risk capital may also be viewed in the context of venture capital where it refers to funds invested in promising start-up companies.
The more risk averse the investor, the lower the proportion of risk capital allocated in the total portfolio should be. Because of their lengthy investment horizons, risk capital investments tend to attract younger investors who can have a very significant proportion of risk capital in their portfolios.
It is important to remember that speculative investments are a very high risk business and inexperienced investors could stand to lose a lot of money. A market that has the potential to provide a trader or speculator with a very high return on investment is, not surprisingly, highly risky and only funds that are surplus to requirements should be risked in the currency markets.
Investment objectives should be carefully considered and weighed against risk appetite and level of experience. There is a big chance that you could make a loss of all of your initial investment and this is why you should not invest money you may need at a later date. Before trading you should be aware of all the associated risks.
You should also be aware that in general, online vendors of trading systems, forex signals and technical analysis tools tend to be slightly optimistic about profit goals and also tend to show overly good performances of their technical analysis tools. More often than not, there are clear differences between theoretical returns and the real world returns.
You should also bear in mind that any information such as opinion, research commentary and news, on-line or otherwise, does not constitute sound investment advice, thus it is advisable not to trade high risk funds based on this information alone. Trading high risk funds is undertaken at your own risk and it is advisable to thoroughly apply your own fundamental and technical analysis before setting out on high risk ventures, as is ensuring you use the services of a regulated broker such as Banc De Binary.