UNIT 3 DISCUSSION BOARD - Essay Example

Unit 3: Discussion Board “Re: Investing is for the little Guy” Evolving technologies and innovative new models are laying a path for both traditionaland non-traditional financial service firms to realize attractive profit margins on investment services, regardless of income level or account size. As these new models drive down costs and enable access to financial tools and education, low-income consumers are emerging as a large and viable market. This introduces an innovative platform that banks can employ to offer a comprehensive set of investment and advisory services to their low-income customers, empowering them to affordably save and invest towards core financial goals such as a first home, business or retirement.

Many argue that doing investment on stock market exchange is a profitable business but only by organization that trade large volumes of securities such as banks, mutual funds, insurance companies, pension funds, college endowment funds, etc. can win. One must not finally close doors and make some consideration by taking risk-return evaluation. The relationship between risk and return is one of the essential concepts to understand when investing—and it is unique for every investor. While some investors may be willing to withstand a higher level of market volatility, others prefer a more conservative approach.

  What is crucial to understands is your risk profile and how it translates into a disciplined approach to investing.Risk, generally equated with the potential of an investment to generate financial loss, is a point to consider when engaging investments. Return is the usual measure of performance. As investments that offer higher potential for total return generally carry a higher potential for risk, informed investors do not simply seek to maximize returns. Instead, they focus on risk-adjusted returns, that is, the potential returns that correspond to the level of risk with which they are comfortable.

Risk tolerance is highly individual, based on a mix of subjective traits and objective circumstances. Your personal risk tolerance can be influenced by current world events, your own investment experiences—even your inherited views on saving and investing.To help you make suitable investment decisions, it is important that you work with a financial advisor who understands your ability to tolerate risk as well as the factors that affect your decisions. A financial plan is a great starting point.

Your financial advisor can work with you to create a ample plan that addresses your long-term goals, while keeping in mind your short-range needs.Individual investors are much better equipped to handle illiquidity than their professional counterparts do. For one thing, individual investors move around smaller amounts of money. For another, they need not worry about short-term performance measurements. They may sit on stocks.Almost no professional investor would dispute the fact that, over the long term, small, illiquid stocks tend to produce higher returns than big, liquid stocks.

Investors should focus their attention on small stocks.The individual investor, with a long-term focus and without the constraints of a big professional money manager, should always be willing to dig around and explore the small-cap arena to take advantage of possible discounts.List of ReferencesTan, B. How to Measure Risk. Buck Investor. Retrieved July 23, 2006from http://www.buckinvestor.com/basics/define_risk.shtml.