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This week, let's talk about investments andinvestment risk. In class with you today are individuals with various...

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Accounting

This week, let's talk about investmentsandinvestment risk. In class with you today areindividuals with various experience in investing - some may beseasoned professionals, while others may have very littleexperience. Either case is perfect okay because weall approach investing, risk, and return differently.

When you invest your money, you have to consider a basicrisk-return tradeoff. The risk-return tradeoff is the balancebetween the desire for the lowest possible risk and the highestpossible returns. In general, low levels of uncertainty (low risk)are associated with low potential returns and high levels ofuncertainty (high risk) are associated with high potential returns(link).

  1. Describe three factors that influence your evaluation of therisk of an investment
  2. What factors influence risk tolerance?
  3. How does diversification positively and negatively affectrisk?
  4. What type of investor would invest in a high beta stock and alow beta stock?

Answer & Explanation Solved by verified expert
3.7 Ratings (332 Votes)
Three factors that influence my evaluation of risk of an investment are i Investment time frame Investments can be made for short term or for long term For short term investments my evaluation of risk tends to be more specific and I adopt a conservative investment approach However in case of long term investments my evaluation is more systematic and I adopt a more aggressive approach towards investing ii My investment objectives My evaluation of risk for an investment is also influenced by my investment objectives When I invest money for    See Answer
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