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Risky business

Article Abstract:

Investors can assess risk in terms of returns and volatility using the efficient frontier method. They can also compare returns for investments adjusted by taking risk into account. Long term investors can bear a higher level of risk than investors seeking to commit themselves for five years or less. Risk levels can be reduced by investing in a range of shares, but there are diminishing returns to diversification. Selecting 10 shares each from a different industry cuts risk by some 90% but a further 10 would only bring a risk reduction of 5%.

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Risking your all

Article Abstract:

UK investors need to be able to assess risk levels in investment vehicles. Unit trusts and investment trusts can perform better than building society accounts, but should be seen as long term investments since they are affected by the volatility of share prices. The relationship between risks and returns can be assessed by plotting an efficient frontier. Investors should do this for their own investments, and look for major discrepancies.

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Risk, return and rationality

Article Abstract:

A change in the equity risk premium seems to hold the best hope for a large increase in UK share prices, but measuring the risk premium is not easy. A fall in the risk premium would lead to a rise in share prices.

Prices and rates, Stocks, Stock prices, Stock price forecasting

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