Investment Risk Factors

by David Jenyns on June 5, 2009

This means that he must come face-to-face with his over-all needs as relate to degree of risk, rate of return, possibilities of growth, marketability and liquidity.

For example, a young dealer will more likely stress growth at a sacrifice of return, while a middle-aged person will place greater emphasis upon adequate current income. The reader may well ask if all such objectives may be realized simultaneously. The first objective of the program should be to minimize risk by means of the basic, time-tested principle of diversification. Bonds (including U. S. Savings Bonds) provide in many cases a secure investment, usually with small risk factor and generally quick liquidation. There are bonds of high, medium, and low grade, and this form of investment should be limited to the first two.

Common stocks represent ownership of a portion of a business venture in the form of “shares”; assumption of larger risks coupled with a higher rate of return; speculative element always present; various gradations in risk usually reflected in price.

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