Risk and reward

The U.S market fell yesterday and it was all red. Today the Asian market i up. Nikkei is up from a two week low. Gold is trading at $1334,50. Netflix is down -15% from it`s all time high. Are you willing to buy stocks in Netflix now? Or blue chips? What about risky small-cap stocks? Bonds?

Investing carries a certain amount of risk, but how much risk are you willing to take? What are you willing to pay for a stock? How much can you afford to lose? You have to look for risk and reward.

When you invest, you can get some pain, but you can also get some gain. That`s why you have to weigh the reward against the risk when you are investing. Understanding risk and reward is the key in investing in stocks and other financial papers.

You have all heard the words: “the higher the risk, the higher the potential return”. It`s very important to understand you own comfort level when you are investing. Then you will clearly understand the relationship between risk and reward.

Bank certificates of deposit (CDs) with a fedrally insured bank are also very secure. But the price for this safety is a very very low return on you investment. You can end up earning nothing when you calculate taxes on your gain and inflation.

To invest you need to think about the amount you are willing to put into the market. Before you invest, you must decide when you are willing to sell. How much rate of return or growth do you accept? And don`t forget fees, inflation and tax and the value of the dollar.

All those thing goes in different directions. That`s why many investors like to put different eggs in different baskets. Investors are diversifying their portfolios, and invest in different papers with various degree of risk. The goal is to take profit from a rising market, and to protect themself against dramatic losses in a down market.

New today: Unemployment Claims at 8:30am, Flash Manufacturing PMI at 9:00am, New Home Sales at 10:00am.


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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