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Risk/Return

Reflect on the importance of the risk and return balance. Consider the following:

•Can we ever have any return without some type of risk?

•If you take on a large risk, are you guaranteed a large return? Why or why not?

•What other factors play into risks that are not covered in the video?

•When have you had to consider risk and return in personal or professional decision-making?

Solution Preview

Can we ever have any return without some type of risk? Not really, because everything inline is related to risk in some manner. There are so called RISKLESS securities - meaning that they are tied to payment via the government. So that makes them as devoid of risk as anything can be. But we also noted not very long ago that even the government creates risk when it shuts down its operations and threatens not to pay its bills because the House and Senate cannot agree on just about anything, including what it takes to keep the government running. If we consider the possibility that we may not awaken from the night before, and that our life can be taken at any moment, accident or not, then risk is always present in one form or another. The real key is understanding our own individual tolerance for risk, then making investment decisions which compliment that level of risk for which we are best suited.

If you take on large risk, are you guaranteed a large return? Why or why not? ...

Solution Summary

Are returns guaranteed if we are willing to take a high risk - a short discussion.

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