Whats the difference between Risk Management & Money Management?TLDR:
Risk management generally is determining what portion of your capital you are willing to risk in a trade and staying true to that.
Money management is how you would spend the money earned (in this case through trading) .
Eg : Rather that withdrawing all the profits from your account you can let it be there and compound it, or rather than spending it on unnecessary luxuries you can save it for a rainy day .
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Full:
This is something I usually get asked many times by new starters in trading as they are both common terms that you will hear as you learn about trading and investing. They are both vital concepts but it's important that you know the difference between them.
Money management refers to the processes of budgeting, saving, investing, spending, or otherwise overseeing the capital usage of an individual or group. The term can also refer more narrowly to investment management and portfolio management.
Money management broadly refers to the processes utilised to record and administer an individual's, household's, or organisation's finances.
Financial advisors and personal finance platforms such as mobile apps are increasingly common in helping individuals manage their money better.
Poor money management can lead to cycles of debt and financial strain.
In the financial world, risk management is the process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions. Essentially, risk management occurs when an investor or fund manager analyses and attempts to quantify the potential for losses in an investment, such as a moral hazard, and then takes the appropriate action (or inaction) given the fund's investment objectives and risk tolerance.
Risk is inseparable from return. Every investment involves some degree of risk, which is considered close to zero in the case of a U.S. T-bill or very high for something such as emerging-market equities or real estate in highly inflationary markets. Risk is quantifiable both in absolute and in relative terms. A solid understanding of risk in its different forms can help investors to better understand the opportunities, trade-offs, and costs involved with different investment approaches.
