Question: Risk And Return In Investing

Overview

Risk and return go hand in hand. Understanding this relationship is critical to making well-reasoned financial decisions, whether you are making personal investment decisions or working for a business where you’re responsible for investing excess cash. This journal assignment allows you to explore the risk-return relationship in the context of investing in stocks in both of these roles.

Prompt

Write a journal discussing risk and return as it relates to investing in stocks.

Specifically, you must address the following rubric criteria:

  • Investment Risk: Explain key risks associated with investing in stocks.
  • Investment Return: Discuss events that can cause the price of a stock to increase or decrease.
  • Risk-Return Relationship: Explain the relationship between risk and return and how this relationship impacts stock investment decisions, using examples to support your claims.
  • Reflection: Describe whether you make stock-investment decisions in your personal life and how you do or would make those decisions.
    • Consider the following in your response: Would your decision-making process change if you needed to make stock-investment decisions for a business? Why or why not?

Solution:

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