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Risk Analysis for Decision Making

            What constitutes risk and return is not such a trivial concept. There are a lot factors that play into risk and return in the stock market. Trying to predict worthy investments is very tough considering there is always risk in the stock market. I don't believe that people can predict the market. I think there are too many dynamics that play into the stock market. For example, a couple factors could be natural disasters or wars. These events influence the market a lot and people can't exactly predict when these events will occur. .
             In my opinion, the risk and return tradeoff is simply, what amount of risk you can take while still remaining comfortable with your investments. Risk literally means the chance that someone's investment with actual have a return different than what is expected. This means you have the possibility to make money, lose some money or lose everything you have invested. Risk can be split up into two categories systematic risk and unsystematic risk. Systematic risk is the market risk, or uncertainty characteristic to the entire market place. This risk is volatility and will fluctuate day-to-day for the stock's price. In simpler terms, systematic risk is the behavior of your investment rather than the reason for the behavior. Unsystematic risk can be described as a risk. This means that the risk comes with the specific company or industry you choose to invest in. This risk can be lowered by diversifying your investments in the industry. .
             Risk is found everywhere when investing in the stock market. There are many different types of risks that exist including: Credit Risk, County Risk, Foreign-Exchange Risk etc. These all factor into the risk of your investments. All of this risk will influence your return on investments. I believe that what constitutes return in the stock market is the effectiveness of your investment. The return of investment evaluates the efficiency of your investment.


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