How Risks And Rewards Related On The Stock Market

Benjamin Franklin once said, “Tell me and I forget, show me and I will remember, involve me and I will learn. “ While he said this long before the start of the study of social learning , he shows an incredible insight to the human psyche. As human beings, we do not all learn the same things in the same ways, but sociologists do look at the way we involve one another in our activities and in our pursuit to learn, whether we realize it or not. The same thing that causes one to learn different things such as our social customs, also leads one towards different deviant activities.

“In investing what is comfortable is rarely profitable,” Robert Arnott, famous entrepreneur. Robert Arnott meant that you have to step out of your comfort zone and diversify our portfolio to succeed in the stock market, in other words diversification. Diversification is one of the most important strategies to use in the stock exchange, and since diversification is one of the key concepts you need to understand and utilize in today's stock exchange, you will need to learn why you use it, how I used it, and the disadvantages and the advantages of diversification.

People cannot lucky all the life in reality. That means we cannot solve all problem by our belief. We need knowledge to live. For ideal case, an ignorant housewife can invest her money by merely her belief and win the market all time. However, does it happen in the reality? Even it happens, there are just very little cases. Without knowledge, it is difficult to live in the world. Comparing a ignorant housewife and a professional experienced investor investing the stock market, they may both lose money. For the investor, he may be wrong in some decision and lose money. But if he could have a lesson from that, he may gain and revise his knowledge of the stock market. Next time, he may keep doing this in a row. Finally, the probability to earn money increases. For the ignorant housewife, if she do not learn from the fault, or tie down the true belief, the probability of earning money would not increase. Therefore, if someone learn from the fault and form a better knowledge on that field, it will be better to him because the probability of doing the right action increases.

Taking intelligent risks in life is very important because if the risk that you take is deemed intelligent, then you can only be benefiting. The risk you take has possible outcomes and they must be determined before you decide to take the risk or not. To determine the outcomes, you must make every outcome a possibility because in a risk, anything can happen. When taking an intelligent risk, you must also realize that it doesn’t have to be a drastic risk. Taking intelligent risks in life can be deemed intelligent if the positive outcomes overweigh the negative ones and should be taken.

Every single investment requires decision making. The result of decision making without certain planning might not end well. One cannot simply make a decision by relying on his/her personal resources as the decision may give an impact to the investments. It is difficult to make decision which is related to the field of investments. Investors have to consider their risks, market condition, rate of return, and others in making their investment portfolio. However, there are many possible physiological biases that make investors become irrational thus making bad decisions for the investment.

The people who always bet on the outsiders tend to be the ones that lose. Making risky investments is a great way to make a lot of money very quickly if you happen to be incredibly lucky. Otherwise, risk takers tend to lose it all and come away with nothing.

Though markets have known to make mistakes, but a deeper study and careful planning and analysis helps an investor decide the asset class it wishes to invest in.

A mutual fund is an open-end speculation organization that puts cash of its shareholders in a typically expanded gathering of securities of different companies, as characterized in the Merriam-Webster word reference. Common assets help with financing and contributing open doors. They allow the little financial specialists to put their cash in different ranges other than stocks and bonds. There is numerous common assets to browse and distinctive reasons why shareholders ought to pick them. As mainstream as common assets have ended up, there is ruins to them like most speculation opportunities. In 2003, mutual funds were giving an awful name when an outrage was brought open.

The risk-return principle. It is a principle that the potential returns on investment rise with the increase in risk. According to this principle, low levels of uncertainty – like in the case of government bonds – have low potential returns. For instance, a US five-year Treasury bond yields a return of 1.125

As an investor, one should demand far better performance for their investment. Managed funds are run by investment professionals who should have a better understanding of market fluctuations. It is clear from this graph that, since less than half of the managed funds beat the Vanguard 500, that an investor has less than a 50-50 chance of picking the correct fund to return a better investment than would be returned by the index fund.

Risk is when there is an opportunity for a return on an investment that will be not the same as anticipated. When investing in an investment instrument, there are risks and the level of risk differs contingent on specific investment, the source of risk also is subject to the investment. The economy can be a change where the investments can be changed and can drastically increase or decrease. Investment returns is the total amount that can be earned or lost in any investment. Risk and return are essentially connected. The relationship between risk and return is the higher the risk there is a possibility of a larger return. The relationship of risk and return is by quantities of investment. Between the higher risk and the lower risk is a return that rises with an increase in risk. The high potential for returns is when there is lower risk (Kinicki, Cornett, Adair, Nofsinger, 2016).

Common Risk Factors in the Retu rns on Stocks and Bonds Eugene F. Fama Kenneth R. French Journal of Financial Economics 1993 Presenter: 周立軒 Brief Saying… • This paper identifies Five common risk factors in the return on stocks and bonds – Two stock market factors, two bond market factors , one market factor. – The five factors seems to explain all returns in stoc k market and bond market • Except the Low-Grade Bonds  Agenda • • • • • Introduction The Steps of the Experiment Data & Variables

In the past, private individuals and large institutions have largely invested in actively managed mutual funds, such as Fidelity, in which fund managers choose stocks with one goal - to surpass the market.

The first question is more important since it plays a vital role in the investment process.

of a large number of assets and try to by diversification to perform as well as the