Risk vs Return get the balance right in stock market

RISK V/S RETURN GET THE BALANCE RIGHT

Investments don't come without risks. All you need to ensure is to get maximum returns with minimum risks. Go ahead be the Smart Investor you wanted to be.

1. UNDERSTAND HOW RISK DIFFERS
  Every investment has different risk factors that cause the asset's value to fall. For example, with  Fixed Deposits, there's a risk that banks may fail to pay back the money. With Equity, the risk is related to price fluctuations.

2. EVEN THE DEGREE OF RISK VARIES
  Another difference lies in the probability. The higher the probability of loss, the riskier is the asset. Volatility is one way of measuring risk. The price fluctuations are why Stocks are considered riskier.

3. SO, HOW DO YOU BALANCE THIS?
  Risk comes from not knowing what you're doing." Warren Buffett, one of the greatest investors in the world, said. So read about what affects your investments. For example, high inflation may be bad news for Equities, but good for Gold.

4. RISK v/s RETURN
  Yes, greater the risk, higher is the potential for returns. However, the exact amount of return for every unit of risk may vary. The Sharpe Ratio measures this. Opt for investments with a high Sharpe Ratio

5. DIVERSIFY TO MINIMISE RISK
  Another step in reducing risk is by diversification. So, when one investment falls in value, the other could give you enough returns. This is why every portfolio should contain a little of both-Equities and Debt

6. MUTUAL FUND CAN HELP!
  Outsource both the need for knowledge as well as diversification by investing through MFs. Let expert Fund Managers invest on your behalf across multiple assets. This can reduce your risk by a great deal

7. GO THE SIP WAY
  Invest small amounts every month So, you invest at different prices every month. So, whether the market is high or low, you end up getting an average cost This lowers risk in the long run.

KEY TAKEAWAYS

Every investment risk differs. The first step is to understand this

Opt for investments that give higher returns for lower risks

Fund Managers help lower risk through their experience.