ECONOMICS
RISK AND RETURN
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Wake up in the middle of the night worrying about the investment
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Be very concerned that a downturn would wipe out the long-term gains
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Understand that an investment that fell when the entire market fell was not necessarily a bad investmen
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Keep all money in a savings account at a bank for long-term growth
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Detailed explanation-1: -Risk tolerance is the amount of market volatility and loss you’re willing to accept as an investor. Determining your personal risk tolerance is perhaps the most fundamental step you can take in deciding what types of investments to make.
Detailed explanation-2: -Definition: A risk averse investor is an investor who prefers lower returns with known risks rather than higher returns with unknown risks. In other words, among various investments giving the same return with different level of risks, this investor always prefers the alternative with least interest.
Detailed explanation-3: -Greater risk tolerance is often synonymous with investment in stocks, equity funds, and exchange-traded funds (ETFs), while lower risk tolerance is often associated with the purchase of bonds, bond funds, and income funds.
Detailed explanation-4: -It is one way to balance risk and reward in your investment portfolio by diversifying your assets. Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited.