Question

What are some common investment strategies, and how do investors assess risk and return when making investment decisions?

Answer 1

Some common investment strategies include:

1. Diversification: Spreading investments across different asset classes to reduce risk.
2. Buy and Hold: Investing in securities for the long term without frequent trading.
3. Value Investing: Buying undervalued securities with the potential for long-term growth.

Investors assess risk and return by considering factors such as:

• Volatility: Measure of how much the return on an investment can vary over time.
• Historical Performance: Looking at past performance to predict future returns.
• Market Conditions: Evaluating economic indicators and trends that may affect investments.
• Risk Tolerance: Understanding how much risk an investor is willing to take on for potential returns.