Relationship Between Risk And Rate Of Return Performance

1416 Words6 Pages
The relationship between risk and rate of return performance. The investors increase their required rates of return as the stocks increases. The security market line increases through the capital market. Some investors have all investments are risky preferences; some individuals will consider low-risk and high-risk investments. “Most of them only know how to invest long-term for growth because most of their financial advisors have only trained on how to develop assets or gather assets but haven’t trained on distribution during retirement” (Shaw, 2014). Expressing goals regarding returns can lead to inappropriate investment practices by the portfolio manager, such as the use of high-risk investment strategies or accounting in an attempt to buy low and sell high churning which involves moving quickly in and out of investments (Reilly & Brown, 2012). For example, an individual may have a return goal such as double my investment in the next five years. “The customer must become fully informed of investment risk associated with such a goal including the possibility of loss.
The Capital Asset Pricing Model (CAPM) the company, can measure each stock according to my market portfolio (Bringham & Ehrhardt, 2014). The CAPM calculated to be nearly 24% and the high market risk of 14. All investors focus on holding period, and they seek to maximize the expected utility of their terminal wealth by choosing among alternatives portfolio 's expected return and standard deviation. All
Open Document