Risk and Return Analysis: How to Analyze Investments
FIN 4011 - Investments
University of Cincinnati
June 11, 2024
One cannot but encounter the fact that each person can choose to invest
funds in various financial products. Arguably, some investments pose
maximally low risks, yet the efficacy of these investments will not be high
enough to guarantee good returns. Some other investments, however,
may increase the chance of getting much higher returns; in any way, the
likelihood of losing money on these investments should not be
underestimated as well. Speculating upon the relationship between risk
and return, it should be viewed as directly proportional to one another. To
make it clear, when an individual aims to make big profit, he/she has to
understand a dire need for risking something valuable. Likewise, the
unwillingness to put substantial money at risk will result in being practically
unable to make good profit.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
One cannot but encounter the fact that each person can choose to invest
funds in various financial products. Arguably, some investments pose
maximally low risks, yet the efficacy of these investments will not be high
enough to guarantee good returns. Some other investments, however,
may increase the chance of getting much higher returns; in any way, the
likelihood of losing money on these investments should not be
underestimated as well. Speculating upon the relationship between risk
and return, it should be viewed as directly proportional to one another. To
make it clear, when an individual aims to make big profit, he/she has to
understand a dire need for risking something valuable. Likewise, the
unwillingness to put substantial money at risk will result in being practically
unable to make good profit.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
One cannot but encounter the fact that each person can choose to invest
funds in various financial products. Arguably, some investments pose
maximally low risks, yet the efficacy of these investments will not be high
enough to guarantee good returns. Some other investments, however,
may increase the chance of getting much higher returns; in any way, the
likelihood of losing money on these investments should not be
underestimated as well. Speculating upon the relationship between risk
and return, it should be viewed as directly proportional to one another. To
make it clear, when an individual aims to make big profit, he/she has to
understand a dire need for risking something valuable. Likewise, the
unwillingness to put substantial money at risk will result in being practically
unable to make good profit.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
One cannot but encounter the fact that each person can choose to invest
funds in various financial products. Arguably, some investments pose
maximally low risks, yet the efficacy of these investments will not be high
enough to guarantee good returns. Some other investments, however,
may increase the chance of getting much higher returns; in any way, the
likelihood of losing money on these investments should not be
underestimated as well. Speculating upon the relationship between risk
and return, it should be viewed as directly proportional to one another. To
make it clear, when an individual aims to make big profit, he/she has to
understand a dire need for risking something valuable. Likewise, the
unwillingness to put substantial money at risk will result in being practically
unable to make good profit.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
One cannot but encounter the fact that each person can choose to invest
funds in various financial products. Arguably, some investments pose
maximally low risks, yet the efficacy of these investments will not be high
enough to guarantee good returns. Some other investments, however,
may increase the chance of getting much higher returns; in any way, the
likelihood of losing money on these investments should not be
underestimated as well. Speculating upon the relationship between risk
and return, it should be viewed as directly proportional to one another. To
make it clear, when an individual aims to make big profit, he/she has to
understand a dire need for risking something valuable. Likewise, the
unwillingness to put substantial money at risk will result in being practically
unable to make good profit.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
It is imperative to remember that absolutely all investments can be
characterized by carrying both risk and yield return. As it was mentioned
before, one cannot help but become aware that risk and return appear to
be inherently related, and it is impossible to separate these two financial
concepts when contemplating upon potential investments. Nonetheless, a
general understanding of the correlation between risk and the potential
return cannot exclude the chances of making inappropriate investing
decisions. The focus here lies in arguing that there is a dire need for an in-
depth quantifiable analysis, which would allow grasping the idea of
investments better. In regard to quantifiable analysis, it rests upon the
findings obtained from mathematical and statistical methods. Considering
a return from investing certain amounts of money, it can predominantly be
calculated by taking away the original sum invested from the overall
amount gained. Significantly, there is an opportunity to determine returns
for either a concrete period of time or for the overall period. For instance,
in case an individual invested $70 and managed to receive a return of $20
during the same year, and eventually got $200 as a result of selling his/her
investment, returns can be seen as follows:
Absolute Profit for 5 years = $20 + ($200 - $70) =$150
Average Profit for 5 years = $150/5 = $30
Profit Percentage = $150 * $100 / $70 = 214% return
Average Profit Percentage annualised = 214%/5 = 42.8%
Regarding the financial concept of risk, it comes to directly refer to either
dispersion or derivation of returns from average rate of returns. A peculiar
thing is that risk can be easily determined by using standard deviation.
Speaking about bonds and common stocks, one has to take into account
the fact that they emerge to be the two pivotal types of assets that
investors utilize to invest for total return. In particular, stocks should be
identified as basically proffering an ownership stake within the
organization, whereas bonds have much in common with loans given to an
enterprise. On the whole, it is important to highlight the fact that stocks
occur as much riskier in comparison to bonds. Notwithstanding this, there
is a variety of different types of stocks and bonds, and their levels of risk
and return are far from being uniform, respectively. Although stocks are
qualified as riskier, it is necessary to know that they are also strongly
associated with much higher returns. According to numerous surveys, it
becomes apparent that corporate bonds typically offer low risks and good
returns, providing that investors come across appropriate enterprises to
invest resources. Specifically speaking, corporate bonds are known as
nearly risk-free assets due to the fact that in the event of bankruptcy, they
give investors extra confidence that their invested resources will be
returned. For all that, bonds offer relatively lower returns on investments,
which in turn results in investment professionals choosing stocks as a more
preferred component of their portfolios.
When an individual takes a decision to invest, he/she is involved in facing
the need to ascertain how to deal with financial assets. Apparently, risk
should be referred to as any sort of uncertainty in respect to the inflow of
cash that may contribute negatively to one’s financial condition. In other
words, it refers to “ situations in which it is possible but not certain that
some undesirable event will occur” (Hansson, 2002, p. 10). For instance,
the investment value can vary depending on changes in business
environment; and ideas on whether to stop investing in a certain business
or continue to expand into the same field of industry can pose serious
threats to the value of a property to investment professionals. To be
precise, getting into international investing, for example, implies the bulk
of business risks that deserve to be thoroughly addressed in advance; and
of all business risks, currency instability and political unrest are those that
investors should consider as the biggest threats.
There is a number of other serious business risks, including the one that
consists in being unable to mach short term financial demands. Apart from
liquidity risk, a failure to diversify the capital into different investment
vehicles occurs as another risk factor. The thing is that the more you invest
in a single area, the greater risks you are likely to face. In sum, adequately
responding to possible risks and putting “things in a global perspective”
(Fisher, 2005, p. 2) can negatively affect decision making process. Yes,
investors have to expand their insight into some fundamental financial
concepts in order to minimize the probability of negative financial
surprises. One has to be conscious that the level of investment risk is
usually directly linked to the level of return. The last but not least,
interpreting risk and return must rely on being aware that those taking
higher risks deserve to be eventually rewarded.
References
Fischer, D. I. (2005). A Step Backward Might Be a Good Thing. Financial
Analysis Journal, 61 (4), pp. 20-23.
Hansson, S. O. (2002). Philosophical Perspectives on Risk. Techné: Research
in Philosophy and Technology, 8, pp. 10-35.
