CFP

AAA

Types of Investment Risk - Introduction



The inverse of investment return is the risk to which an investment is subject. The academic literature has treated the concept of risk extensively. For the purpose of this discussion, risk may be viewed as the likelihood of an adverse outcome (e.g. loss). A critical component of the portfolio management process is the risk management function. Professional and individual investors alike manage risk rather than return. An understanding of the different investments and investment vehicles discussed in the prior chapter would be incomplete without an understanding of the risks that accompany them. This chapter defines the various types of risk and furnishes examples by illustrating the types of investments to which the various types of risk apply.

Learning Objectives

  • Be able to define and discuss the various types of risk to which investments are subject.
  • Be able to define, discuss and differentiate between systematic and unsystematic types of risk.
  • Be able to give specific examples of various types of investment risk.
  • Be able to compare and contrast the various types of investment risk.
  • Be able to discuss why an understanding of investment risk is critical to the portfolio management process.
The Risk Dichotomy
comments powered by Disqus
Related Articles
  1. Hypothesis Testing in Finance: Concept ...
    Active Trading Fundamentals

    Hypothesis Testing in Finance: Concept ...

  2. Top 6 Ways To Recession-Proof Your Job
    Personal Finance

    Top 6 Ways To Recession-Proof Your Job

  3. The Illusion Of Diversification: The ...
    Fundamental Analysis

    The Illusion Of Diversification: The ...

  4. Solutions For Concentrated Positions
    Investing Basics

    Solutions For Concentrated Positions

  5. Introduction To The Portfolio Dedicated ...
    Investing Basics

    Introduction To The Portfolio Dedicated ...

Trading Center