Risk and Return Journal Assignment Example | Topics and Well Written Essays - 500 words

Risk and Return daybook - Assignment ExampleThis journal examines the importance of jeopardize and returns balance (De Bondt and Werner, 1993).Investing in a unhazardous portfolio leads to low or no return on investment specie. For example, an investment in risk-free government bonds yields refined returns on investments. Investors tend to increase their profits by venturing into riskier portfolios. Increasing income is the primary function of doing business, so it is indispensable to venture into a substantial amount of risk to achieve this objective. Keeping this in mind it is prerequisite also to note that taking on a large risk does not necessarily cover high returns. There are two aspects of risk, first is the probability of loss on investment. For example, if an investment yields pull down returns than expected. Then there is the possibility of earning more than what is. For instance waiting to get 11% return localise but getting a 13% return rate (Bailey, 1994).It is authorised to maintain a risk and return balance to reduce exposure to losses brought about by risk. When evaluating the risk and return balance, the investment period is arguably the most important factor to be. If the investment period is long, it is advisable to maintain a relatively higher risk tolerance level. If the investment period is short, an investor is advised to maintain a pooh-pooh risk tolerance level. Another equally important factor is risk capital that is the amount of funds available to pile without affecting daily business operations. Having many risks capital gives angiotensin-converting enzyme freedom to trade in high-risk investments. On the other hand, having a small amount of risk capital limits ones freedom to sell in high-risk investments (Bailey, 1994).The amount of investment experience held is another important factor. Relatively new investors are not advised to commit significant sums of capital. However, experienced investors with enough intimacy on risk can invest