Risk & Return PDF
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This document discusses the concept of risk and return in finance, explaining how different financial products such as fixed deposits, bonds, and shares provide varying returns. It highlights the difference between expected and actual returns, emphasizing the crucial role of risk and volatility. The text further emphasizes a strategy of maximizing the Sharpe ratio in investing, which balances return for a similar level of risk.
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\[00:00:00\] Understanding Risk and Return Looking around us, we find that different financial products, such as fixed deposits, bonds and shares, give different returns. Why do the returns differ? Suppose investment A has an expected return of 3%. If investment A performs better than expected, act...
\[00:00:00\] Understanding Risk and Return Looking around us, we find that different financial products, such as fixed deposits, bonds and shares, give different returns. Why do the returns differ? Suppose investment A has an expected return of 3%. If investment A performs better than expected, actual return will be above 3%. If it performs worse than expected, actual return will be below 3%. Actual return will be 3% only if investment A performs as expected. The presence of risk or volatility means that the expected return can differ from its actual return. The difference between actual and expected returns is risk or volatility. A simple statistical measure for risk is Standard In investing, we aim to maximize the Sharpe ratio, which maximizes return for the same risk, or minimizes risk for the same return. Further, to be successful in investing, you must understand your risk appetite. Assess your risk appetite on three dimensions Hvis du planlegger å utrette deg på 40 år, vil du bruke å generere større retninger som vil tilføye tidligere utretning. \[00:03:00\] Hvis du har forhånd Your ability to take risk is likely to be lower than someone with no dependents. If you have the need and ability to take on risk, but find it unsettling after buying a risky stock, then willingness is low. You may want to consider investments with a lower risk profile, such as investment-grade bonds. Imagine investing as choosing a roller coaster ride. If you choose a wilder ride than you can handle, you are likely to want to get off the ride halfway, as it is scary when it dies. Similarly, if you have investments that are too risky for your risk appetite, Dere kan panikke og glemme dem først når markedet døde. Kjelen til at investeringen blir er \[00:04:00\] muligheten til å holde seg investert. Hvis dere går i halvdelen rollercoasteren, kan dere forløpe investeringene. Ved å holde seg investert kan dere også forløpe markedets volatilitet og businesscykler I neste video finner du ut mer om portføljediversifikasjon.
