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Bookmark or Share- Beta Definition & Example - InvestingAnswersA risk-averse investor, for example, may want to avoid overweighting their portfolio with high-beta stocks to avoid excessive volatility. Individual stock betas are extremely important when putting together a portfolio of assets. A diversified portfolio consisting of assets with different betas lowers the overall risk of the portfolio.
- Passive Management Definition & Example - InvestingAnswersLet’s assume you have $100,000 to invest. Based on your circumstances, risk aversion, goals and tax situation, your investment advisor puts $50,000 of the money in stocks, $30,000 in bonds, $10,000 in real estate, and $10,000 in cash. Thus, 50% of the portfolio is in stocks, 30% is in bonds, 10% is in real estate, and 10% is in cash.
- Risk Averse Definition & Example - InvestingAnswersRisk averse is an oft-cited assumption in finance that an investor will always choose the least risky alternative, all things being equal. How Does Risk Averse Work? Modern portfolio theory (MPT), which is the theory behind why diversification works, relies on the assumption that investors are risk averse .
- Risk Lover Definition & Example - InvestingAnswersThus, investors who are risk lovers generally choose high-risk investments. Being a risk lover is good and bad. The returns can be far higher, but when it's inappropriate for an investor to risk losing cash (for example, if the investor is planning on retiring soon or must put a child through college soon), there is little time to recover from ...
- Market Timing Definition & Example - InvestingAnswersLet's assume you have $100,000 to invest. Based on your circumstances, risk aversion, goals, and tax situation, you put $50,000 of the money in stocks, $30,000 in bonds, $10,000 in real estate, and $10,000 in cash. The market timer seeks to sell at the 'top' and buy at the 'bottom.' Thus, if interest rates increase, the market timer may sell ...
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