Risks
Risk is the expresses of the amount by which the return for a certain investment could be higher or lower than its average expected value.
- or –
Risk is the probability and the extent by which the actual result could be diffrent from the expected result.
Types of investments
Bank accounts
Extreamely liquid
Low Rate of Return
Very low risk
Money market funds
Liquid
Moderate risk
Moderate Rate of Return
Certificates of Deposites
Moderate liquid
Very low risk
Moderate Rate of Return
Diversified portfolio of corporate bonds
Liquid
Moderate Risk
Moderate Rate of Return
Diversified portfolio of corporate blue-chip bonds
Liquid
Low Risk
Low Rate of Return
Diversified portfolio of ricky growth stocks
Liquid
High Risk
High Rate of Return
Real estate
Low Liquid
Medium Rate of Return
Medium Risk
Precious metals
Low Liquid
High Rate of Return
High Risk
Random Walk: Theory of Stock Prices
The price of a stock is determined by the future profit a company earns.
The current stock price incorporates all the information that is available about future profit as a part of the stock price. What makes a stock price move is new information, which is unpredictable.
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