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"In finance, risk is best judged in a portfolio context." Is this true? Why?
Finance & Accounting
Pages 6 (1506 words)
Running Head: Risk and Portfolio Context Risk and Portfolio Context [Writer’s Name] [Institute’s Name] Risk and Portfolio Context Introduction Finance is all about allocation of an individual’s assets in such a way that these assets generate return over them so that their value increases with time and inflation, and provides financial benefit to the investor.
Risk in Investment Risk is a core element of investment and is inseparable from investment function. According to investment theories and actual practices, it is evident that there is no possibility of return over the investment without the assumption of risk in that investment by the investor. A conscious and willing assumption of risk by a knowing investor, expecting to earn a measure of return, lies at the heart of investment process (Sedleck, 2008, pp.1). Webster defines risk as “the possibility of loss or injury” (Sedleck, 2008, pp.3), in investment risk is the possibility of monetary loss through the loss in value of the investment instrument. Risk is a subjective measure with many possible definitions. This is because different investors adopt different investment strategies to attain their investment objective. Therefore, the subjectivity of the risk is its only main characteristic. It is an unavoidable function of investment, intelligent investment strategies can help to reduce it but nothing can help to ignore, negate or make risk zero (Sedleck, 2008, pp.3). ...
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