Page 1 of 2

Risk and Return

Response Guidelines

Respond to at least two peers (see below). Your responses should be substantive and could involve one or more of the following:

o Debate the topic. o Ask a probing question. o Share an insight you gained from your peer’s post. o Make a suggestion. o Share a personal experience related to the topic. o Expand on your peer’s post.

Student 1

The return is the income received on an investment plus any change in market price, usually expressed as a percent of the beginning market price of the investment. The risk is the chance that an investment’s actual return will be different. Basically, this means you have the possibility of losing some, or all of your original investment.

Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries, and other categories. It aims to maximize return by investing in different areas that would each react differently to the same event.

Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.

Lioudis, N. (2018, March 20). The Importance Of Diversification. Retrieved from https://www.investopedia.com/investing/importance-diversification/

Page 2 of 2

Student 2

Ross, Westerfield, Jeffrey, and Jordan (2018) studies found that the risk and return analysis could be defined as being a combination package between two situations. The quantity of a return could be obtained from creating an investment with an organization (Ross, Westerfield, Jeffrey, and Jordan, 2018). The risk of an investment would act as a negative or positive reaction (Ross, Westerfield, Jeffrey, and Jordan, 2018). Ross, Westerfield, Jeffrey, and Jordan (2018) studies indicated that the uncertainty of returns sources from the low potential of returns, which can also be flipped into the higher the return the higher potential. The importance of the portfolio diversification is due to the positive effects of the risk of an investment (Ross, Westerfield, Jeffrey, and Jordan, 2018). Ross, Westerfield, Jeffrey, and Jordan (2018) studies found that the portfolio diversification plays a role of a risk management technique, which blends all the investment within a portfolio. The portfolio diversification benefits the investment by helping as fencing net, which minimizes the risk of capital loss (Ross, Westerfield, Jeffrey, and Jordan, 2018).

Reference:

Ross, Stephen, Westerfield, Randolph, Jeffrey, Jaffe, and Jordan, Bradford. (2018). Corporate finance: Core Principles and Applications. Ed. 5. McGraw-Hill Education. Retrieved from https://online.vitalsource.com/#/books/1260384357/cfi/6/26!/4/2/2@0:0