How do I measure risk when evaluating an investment?
There are major causes of risk.
Volatility is a sudden shift in value from high to low or from low to high. The more volatile an investment is, the greater profit you can earn. That's because there is a bigger potential spread between the price you pay for it and its market price when you sell it.
There are major causes of risk.
Volatility is a sudden shift in value from high to low or from low to high. The more volatile an investment is, the greater profit you can earn. That's because there is a bigger potential spread between the price you pay for it and its market price when you sell it.
Demanding high yield -When the economy is down and interest rates decline, many investors still expect the same rate of return, and seek therefore investments of lesser quality in order to achieve it. Seeking a higher return can result in higher losses as well.
Playing it too safe -The more money you have in the safest investments (like CDs, bank accounts, and treasury bills), the smaller your chances are for substantial rewards. When you play it too safe, there is always the risk of outliving your assets because they won't keep up with inflation.
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