New system for the evaluation of investment risks

Karlsruhe, May 4th, 2012. LONG-TERM INVESTING Research AG has introduced a new system for the evaluation of investment risks. This new system fulfils two requirements:

- It takes the complexity of the different investment risks into account.

- The evaluations are easy to understand for almost everyone.

This is achieved by separately analysing the four main investment risks (default risk, price risk, liquidity risk and inflation risk) in a first step.

In a second step, the results of the analysis are categorised with school marks and are therefore evaluated in generally understandable terms. Initially, we have applied the German system with marks from 1 to 6, but our methodology can easily be adjusted to the systems of assigning marks in other countries.

As a result, every investment receives a risk report which summarises and describes the single risk types. Graphically, the risk report is illustrated in the form of a risk diamond.

To explain our assessment based on school marks and our evaluation criteria it is described with the following example. The risk evaluation of a corporate bond from a solid company with 10-year maturity:

Default risk (risk of a lasting depreciation): Mark 2 (comparable to a B grade in the United Kingdom)

Price risk (risk of a temporary depreciation because of price volatility): Mark 2 (comparable to a C grade in the United Kingdom)

Liquidity risk (risk of insufficient demand): Mark 3 (comparable to a C grade in the United Kingdom)

Inflation risk (risk of a loss of purchasing power): Mark 5 (comparable to an E grade in the United Kingdom)

Many investors have rightly complained during past years that they have not been fully aware of the risks of their investments. This new evaluation system creates transparency by describing the risks. This simplifies the choice of investments, enabling investors to select investments that suit their own risk profiles.

LONG-TERM INVESTING Research AG - Institut für die langfristige Kapitalanlage - is an independent research company which provides analysis and consultancy services especially suited to the demands of the long-term investor.

Press contact: Karl-Heinz Thielmann

LONG-TERM INVESTING Research AG - Institut für die langfristige Kapitalanlage
Weinbrennerstr. 17
D-76135 Karlsruhe
Tel.: +49 721 6293 9773
Fax: +49 322 2376 4968
Email: khthielmann@long-term-investing.de
Internet: www.long-term-investing.de

This release was published on openPR.