6-2, Journal Risk and Return in Investing PDF

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This was great class information was not easy but I hope this helps with something if you have lost your way....

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6-2 Journal: Risk and Return in Investing

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6-2 Journal: Risk and Return in Investing Christopher Pustam Southern New Hampshire University June 17th, 2021

6-2 Journal: Risk and Return in Investing

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Investment in equities has numerous dangers. General risk is a danger that cannot be removed since it is connected with a stock market risk. The danger of inflation is the risk of an investment losing money because of inflation. The value of a consumer investment would be reduced by inflation. The re-investment rate risk is where you have an investment and choose to re-invest a portion elsewhere; however, the re-investment amount must be returned at a lesser rate. Interest rate risk is a risk in which the rate of return interest might be soft and, as such, the rate of return may at any moment increase or fall. The exchange-rate risk is a risk involving a foreign-market exchange rate for the currency. When going outside the United States, most may have heard of exchange rates. It is the same idea when the consumer spends $100 in US dollars in a foreign market where the $2 US dollar or a ratio of $1/2 or $1/$2 is valued for a foreign dollar. Unsystematic risk is the danger of one safety, company, industry, or nation. Diversifying investing can contribute to reducing unregulated risks. Corporate risk concerns the operational revenues risk of enterprises. There is a more considerable company risk than companies with steadily stable operating incomes when operating revenue varies. Financial risk is a risk that affects a company's financial health or investment chance. When a firm has sufficient cash flow to pay its liabilities, its financial risk is lower than a company with insufficient operational earnings to meet its debts. Finally, the danger of having healthy governments or turbulent governments is the political risk. Venezuela is an example of high political risk since there was turmoil in the nation. A disastrous investment in its present political and financial condition would be its financial weaknesses. A stock can grow or fall in value for many reasons. For example, if a car carrier publishes a new sales model, stock prices might start with and grow as buyers move quickly to obtain the new model for their vehicle. Over time there are problems with various car parts, and the

6-2 Journal: Risk and Return in Investing

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manufacturer places a list of vehicle reminders. With the recall in place, buyers do not believe that the car is the best on the market, and because of the recalls, they decide to spend money on another vehicle. In addition, stocks can be increased or decreased through government regulation or deregulation. For example, if the government decides to restrict 5G, all customers investing in 5G firms will lose money. The rules would stop 5G from developing further. Increasing or reducing stock value might also lead to natural calamities. For example, almost every sort of travel firm was burdened by Covid. The impact of Covid and how to travel prohibitions have created a financial problem for many have been highly felt by cruise companies and airlines. Exactly what is said is the risk-reward relation. The greater or lower risk in investment means that the return on the same investment is higher or lower. Risk-based investments and returns are the responsibility of the investor. If an investor wants big profits, it involves higher risk. The investment may be a homerun or maybe a person. If an investor wants to play safely and has less return, the risk is reduced. An example would be the choice between investing in a bond or a share in the risk-return relation. A bond is fixed throughout time so that the risk is smaller than that of a stock with a value that may therefore be more fluctuating than that of a bond. I am not currently investing in stock or bonds. I saw family members investing in equities and bonds to some success. However, Covid wiped out their whole accomplishment. I would invest in bonds, mid-risk assets, and some high-risk ventures if I did invest. I would want to see the lesser-risk assets constantly diversify my money, with a modest positive return rate, and my fingers pissed that the greater-risk investments are panning. I hope that the lower investment and rates of return would assist in hiding these losses if investments with high risk were lost.

6-2 Journal: Risk and Return in Investing I would take the board of directors if I were operating a company and had investment decisions to make. I do not feel that it should be up to one individual as a company but rather more than a majority rule choice in the interests of the enterprise. However, I believe that diversification is the most incredible option if a company chooses to invest in inventories and bonds. It is never a brilliant idea to put all your eggs in one basket for personal and company investment.

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6-2 Journal: Risk and Return in Investing Reference: Titman, S., A. J. Keown, & J. D. Martin (2018). Financials management: Principles and applications.

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