Risk vs Reward

In all business ventures, they all come with their perceived risks and consequences. What does risk vs. reward mean?

In all business ventures, they all come with their perceived risks and consequences. What does risk vs. reward mean? In simple terms, this is the investing of money into markets that pose a high degree of risk, and if you're going to take the risk, the amount of money you stand to gain needs to be big. 

Risk involves the probability and likelihood that the actual return on investment will be different or probably altered from the expected return. It involves the possibility of losing some or even all the parts of an investment.

A very fundamental correlated phenomenon in the invest and business world is the relationship between risk and reward (return). Let's look at an example of an investor, shall we?

The greater the risks involved in an investment in which the investor is willing to undertake, the greater the potential reward or return he stands to gain. So let's say he wishes to invest in stocks, but unfortunately, the market insights show him that investing in stocks may not be a good idea and that he stands the chance of losing some money. 

The investor ignores all the warnings and still goes ahead to invest in stocks even with the foreknowledge that he might lose his capital. In the long run, you find that when everyone was busy selling and selling to cut down on the risks, the investor is buying and buying. The market finally stabilizes, and we see that the investor is raking in assets and properties.

When looking at the relationship between risk and reward, it’s easy to see why they are both related and how can either make or mar an investor, because risk is simply the potential of gaining or losing something of value. So, the greater or higher the risk an investor is willing to undertake in an investment, the greater reward and returns he stands to earn.

When making risk vs. reward options into considerations, it is important to carry out the following:
•    Find a stock and conduct extensive research on it
•    Looking at a price, try and set the targeted ups and down prices
•    Calculate the risk vs. reward