Why are investors risk-averse? How can investors deal with different degrees of risk? Justify your answer.

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Why are investors risk-averse? How can investors deal withdifferent degrees of risk? Justify your answer.

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Any rational investor invests in various instruments primarily to earn from dividend or capital appreciation on investment over a period of time The objective may be profit maximization which is short term or wealth maximization which is long term in nature Investments are made to beat inflation and to maintain a certain standard of life style If cash is kept idle in bank accounts then it will earn only nominal rate of interest which will not help to beat inflation hence the Investors look for alternate investments where they can get higher returns In principal higher the risk higher is the Expected Return There are numerous See Answer

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