So what is. your investing startegy? Investment is all about RISK vs. REWARD
Risk is the chance you take of making or losing money on your investment. The greater the risk, the more you stand to gain or lose.
1. Volatility: means sudden swings in value - from hight to low, or the reverse. The more volatile an investment is, the more profit you can make since there's a bigger spread between what you paid and what you sell if for. But if the price drops by the same amount, you can lose big too.
2. Demanding High Yield - When the economy is down and earnings decline, many investors seek investment with the same returns they got in the better times. The risk is buying lower quality, unfamiliar stocks which promoise high return. This could result higher losese as well.
3. Playing it TOO SAFE - If you take no chances, you run the risk of coming out short. The more you have in the safest investement like CDs, saving account, treasury bills, the smaller your chance of substantial reward. There's also the risk of outliving your assets because your safety investment won't keep up with inflation and longevity.
One way to measure the relationship of risk vs. reward in the stock market is to balance how much you think a stock is likely to rise against how far it could fall from its current price. For example, if a stock selling for $30 could go up to $60 or fall to $20, its ratios is 3:1 (or 30 up/10 down). If a stock selling for $45 can goes up to $50, but could still fall to $10, the ratio is 1:7 (or 5 up/35 down) which may make it two risky.
Among Conservative, Aggressive, Speculative investment strategies, which one should I choose?
Conservative investment strategy takes only limited risk by concentrating on liquid, secure stock and fixed income investments. Aggressive investement strategy takes risks by putting money into growth stocks. Speculative investment strategy takes major risks on investments with unpredicatble results. Investing in future, option, speculative stocks and junk bounds are high risk investment.
In general, there are three types of risk involved in investment, LOW RISK, lmited risk, HIGH RISK. There's NO such thing called ZERO RISK. There are always factors you can't control - like War betwen Russian and Ukraine, Covid-19 Pandemic, and high inflation in US and crossing world during the past a few months. However, general speaking, government bonds is categorized as low risk investment, which is not the case for Russian Government bonds during the war time. High risk invesment, like stock in a new company, however, if the company successed, return on investment could be huge.
We all know that there is no zero risk thing existing in the world. Try to weigh risk and reward seems like throwing darts, investors don't know the ups and downs that will occur. History tells us that over several decades, investors who put up with the stock market's gyrations earned returns far in excess of bonds and treasury bill investment.