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Investment risk can be defined as the chance of return to happen from the investment, which may differ from the expected return
.The likelihood of return to happen from the investment, which may differ from the expected return refers to the risk of investment.
with certain measures, such as commonly used in the statistics Risk can be defined as a chance that the actual outcome from an investment. Will
.Differ from the expected outcome. The total risk of investments can be measured
with such common absolute measures used. In statistics as variance and standard
deviation. Variance can be calculated as a potential deviation of each possible
investment. Rate of return from the expected rate of return. Standard deviation is
calculated as the square root of the variance. The. More variable the possible
.Outcomes that, can occur the greater the risk.
Fundamental Risks All strategies have risks. After all you don, t get. ' Returns for taking on zero
risk. The key is to understand them and be sure they are worth taking.
Here are some key risks:?
Investment risk 'is the variability of returns and the chance that your investment will return less than, you expectOr your investment makes a loss leaving you with less capital than when you started or your, investment doesn t even keep. ' Up with inflation meaning it is worth less over time.
'Volatility' is the relative rate at which the price of an investment. Moves up or down.
, Generally the higher the potential returns the greater, the risk. The smaller the, potential risks the. Lower the returns.
.RISK / RETURN TRADE-OFF
Successful investors understand the risk and return characteristics of their investments and their. Own 'risk profile'. For more information about understanding your 'risk profile', click here.
Different investors will. Weight their portfolios in different ways depending on, their investment goals and 'risk profile'.An investor who is aiming for capital growth over the long term and who, has the capacity to tolerate greater volatility. And fluctuations in the value of, their investments may choose to include more higher risk / higher return investments than. An investor who relies on their investments for a regular income. For example shares in, a speculative mining company may. Be, quite volatileWith the share price moving considerably over a short period of time. On the, other hand residential property is usually. Less volatile with property, prices moving more gradually over a longer period of time.
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