Just because you’re paranoid doesn’t mean they aren’t after you.
By now, you may have decided that your author is risk-obsessed. That may well be the case, but such concerns are actually a safety mechanism so long as they are rational. We’ve covered many types of risk that may have left you feeling a little paranoid as well. In this final section on risk factors, we’ll examine how risk factors converge in your portfolio to create a new form of risk that is different from the individual risks of the different securities in your portfolio. It may seem counterintuitive, but your total risk is different from the sum of its parts.
A risk-averse investor dislikes risk and will avoid high-risk stocks or investments and (even if they don’t know it) is prepared to forfeit higher rates of return. Investors, who are looking for “safer” investments, typically invest in savings accounts, bonds, dividend growth stocks, and certificates of deposit (CDs).
Last Updated: 6/25/2018