What is Risk Management?
Many investors have difficulty figuring out exactly what risk means to them. But this is an crucial topic to understand if you are to succeed in today’s markets. In the financial world, risk management is the process of identifying and handling uncertainties in one’s investment decisions. If you can manage your risks, then your investment’s should perform well over time. As the most famous investor Benjamin Graham once said, “the essence of investment management is the management of risks, not the management of returns.”
How to Properly Analyze Investment Risk
Whether it is investing, playing sports, or driving down the street, you are constantly exposed to risk. Your demeanor and lifestyle choices largely determine how much risk you are comfortable with. When it comes to investment risk, your temperament play a major role in shaping your risk tolerance. Since risk is defined as the likelihood of a financial decision’s outcome being lower than the expected return of a particular investment. To this end we have to examine a few factors that will determine your tolerance for risk.
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