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Risk And Risk Of Risk Video

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In the first part of this two-part series on risk, iRsk focused on personal risk. In this part I want to discuss Risk And Risk Of Risk risk. As you recall, I previously described risk as something that has an uncertain outcome. So if we define an investment as buying something that has the potential for growth or generating income, then we can define investment risk as the uncertainty associated with that investment growth or return.

Investment risk is one of the cornerstones of investing. The other cornerstone is expected return, in other words how much growth or income can you expect from a particular investment.

Combining these two concepts together is what is referred to as the risk-return Risk And Risk Of Risk - how much investment risk are you taking on for the expected investment return. Typically higher risk implies higher expected returns, but not always. Sadly though, this is not the case because when you do the maths the expected return is actually very low or negative, as we showed previously. And although your instinct might be to avoid investment risk at all cost, given even the smallest possibility of losing money, the problem with low-risk, low-return options is that very often they fail to outperform inflation. In effect, you would have lost money!

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The two key things to consider here are the time horizon of your investment and the diversification of your investment. More specifically, can you afford to wait for better times and how can you avoid having all your eggs in one basket. The reason why time is so important is because in investing, prices can go up and down. Why this happens is because most investments are traded in an open marketplace where the price is determined by negotiation between a willing buyer and a willing seller. The frequency and magnitude of these price swings are referred to as the volatility of the investment.

Should you cash out or ride it out?

To explain the concept of volatility, let's consider the price of your house and the price of Bitcoin, a cryptocurrency that has become very popular with speculators. It's very unlikely that the price of your house will vary drastically in one day. Bitcoin therefore has high volatility, compared with property prices. The most important thing to know, is that if you can afford to hold onto an investment for long enough, you can largely ignore the investment's short term price fluctuations. Another common way of reducing your investment risk is through diversification. The reason for this is to spread out different types of investment risk so that by investing in diverse assets, such as property, equity and cash, you reduce your overall risk because the chances of something bad happening to those different asset classes simultaneously is very unlikely.

The second life Risk And Risk Of Risk of investing is diversify your investments. This means spreading your investment risk out over different types of investments. To sum up, we all want to get rich quick, but remember that wealth can take a lifetime to build and a second to lose.

How to become the 'This Is Fine' dog...financially

Ridk Investment risk is real. Protect yourself against the risks by thinking carefully about the risk-return ratio is right for you and where possible, spread your investments out over different types of investments. Thomas is passionate about developing technology to help people live happier and healthier lives. With the markets in such turmoil, the question on whether or not to cash out or ride it out is always front of mind.

We look at some past examples to argue that it's better to ride it out. Thomas Brennan Thomas is passionate about developing technology to help people live happier and healthier lives. Recommended for you.]