Investment Risk and Return
Risk means uncertainty. In investment risk, when there is uncertainty attached with the outcomes of investment opportunity. In global markets there are lot of risk attached with the securities that can negatively affect the return of an investment opportunity.
There are basically two types of risks:
1. Systematic Risks These risks occur inside the organization that can affect the profits of the organization. such as inefficiency of the management, labor unavailability or strikes. We say this risk as controllable because this can be controlled to some extent by the executives.
2. Unsystematic Risks This type of risk exist outside the organization and are more worse than systematic risks. Such as political factors, competitors strategies, material unavailability, etc. This is also called uncontrollable because it cannot be controlled by the management of the firm.
The return on investment varies from company to company depending upon the nature of organizations and their basic objectives. If the organization is for charitable purposes it will require the non-profit return.
The return may in different forms like increase of sales volume, increase in the firm marketability, increase in customers loyalty. And also return may be positive or negative. This depends upon the risk associated with the investment opportunities.
Risk and return both go side by side in investment opportunities. The most spoken business slogan is "Higher the risk higher the return". Means investing in most risky portfolio (set of diversified investment opportunities) will yield the higher return as compared to the risk free assets. But in portfolio management when we combine different investment opportunities to composite the portfolio and we want higher return with minimum risk. For this purpose we add a risk free asset in our portfolio.
Risk means uncertainty. In investment risk, when there is uncertainty attached with the outcomes of investment opportunity. In global markets there are lot of risk attached with the securities that can negatively affect the return of an investment opportunity.
There are basically two types of risks:
1. Systematic Risks These risks occur inside the organization that can affect the profits of the organization. such as inefficiency of the management, labor unavailability or strikes. We say this risk as controllable because this can be controlled to some extent by the executives.
2. Unsystematic Risks This type of risk exist outside the organization and are more worse than systematic risks. Such as political factors, competitors strategies, material unavailability, etc. This is also called uncontrollable because it cannot be controlled by the management of the firm.
The return on investment varies from company to company depending upon the nature of organizations and their basic objectives. If the organization is for charitable purposes it will require the non-profit return.
The return may in different forms like increase of sales volume, increase in the firm marketability, increase in customers loyalty. And also return may be positive or negative. This depends upon the risk associated with the investment opportunities.
Risk and return both go side by side in investment opportunities. The most spoken business slogan is "Higher the risk higher the return". Means investing in most risky portfolio (set of diversified investment opportunities) will yield the higher return as compared to the risk free assets. But in portfolio management when we combine different investment opportunities to composite the portfolio and we want higher return with minimum risk. For this purpose we add a risk free asset in our portfolio.
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