You must have heard many times that “if No pain, then no gain. There is great risk in investing but some gain as well .
You must be weighing the possible incentive against the risk , when you will be deciding to make an investment. It is very important to get the knowledge of risk and reward , when you build philosophy about your personal investment.
All investment holds risk of some degrees . The higher risk one takes , the higher one gets potential return.
For understanding this relationship completely, it is necessary to know the comfort level of yourself , thus you will be able to determine the risk of your stock .
Will I Lose My Money?
Most of the people suppose the risk of investment in one way. that how possibily will I lose my money? You must consider the following things before investment:
• Will my investment lose money?
• Will i be able to achieve my investment objective?
• Am I ready to accept any kind of risk to get higher returns. ?
Let’s have a look at the concerns about risk.
Will my investment lose my money?
There is the most common kind of risk is , that your investment could lose money. There are many investments that give guarantee you will not lose money. Forexample Treasury bonds of U.S. , but you will be deprived of my opportunities to earn more money.
Will I Be Able To Achieve My Investment Objective?
The following elements determine your investment objective.
• Invested Amount •
lenght of Investment
• Rate of return
• Less fees, inflation t, taxes, etc.
If you cannot afford much risk in investments, so, you will not be able to earn high returns.
For achieving financial objectives, many investors prefer a demure amount of risk .They make diversifying portfolio with risk of different degrees. They look forward to taking benefits of a mounting market and protect from losses in a fallen market.
Am I Going To Accept Any Kind of Risk To Get Higher Returns. ?
Every investor should construct an own investment strategy that how much lose he or she can bear.
Such portfolio that can bear a considerable degree of risk can get outstanding returns, but sometime they also fail dramatically.
There’s no concept of right or wrong quantity of risk. It’s investor’s personal decision .Nevertheless , a young investor could take higher risk in his or her investment than older investors could , because there is no recovery problem for the young investor as he or she has still enough time , if any disaster strikes to stock market. If only five years are left in your retirement certainly, you would not be agreeing to take any extraordinary risks.
If investors keep diversifying portfolio consist of bonds and stocks they can control some risk. Many investors prefer to keep their portfolio in stocks than keeping in bonds , it must be avoided .Feeding of comfort level is necessary for every investor. Old people should not take extraordinary risk because they don’t have enough recovery time.