Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome). The notion implies that a choice having an influence on the outcome sometimes exists (or existed). Potential losses themselves may also be called "risks". Any human ...
28
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6answers
3k views
What is the best asset allocation for a retirement portfolio, and why?
Based on financial conversations I've had with trusted family members, I believe that asset allocation is one of the more critical things to "get right" during retirement savings.
Based on an ...
11
votes
3answers
677 views
No transaction fee ETF trades - what's the catch?
I just noticed TD Ameritrade has program where you can trade from a list of ETFs with zero fees.
Sounds like it could save me a bit of money, but my cynical side wonders how they make money off such ...
11
votes
1answer
504 views
How does a synthetic ETF work?
A comment on my recent ETF-related question mentioned swap/synthetic ETFs.
Most of what I can find on the web glosses over the mechanics. Can someone walk through what is happening behind the scenes?
...
9
votes
3answers
244 views
What is a “Junk Bond”?
I was reading Barbarians at the Gate and I read that junk bonds were required to do large leveraged buyouts. What is a junk bond and how does it differ from a regular bond? Why is there higher ...
9
votes
5answers
523 views
What should I do with the stock from my Employee Stock Purchase Plan?
I've got an employee stock purchase plan program. The details are a little tricksy, but I basically get to buy about 2500 shares of company stock at something like $2.33/share... and the stock has ...
9
votes
1answer
101 views
What are the risks in buying a property from a “Tax Deed” auction?
Recently, I was approached by a friend of my wife's, and she said that she and her husband were making a lot of money bidding on properties that went up for sale in our area, at auctions like this ...
8
votes
5answers
238 views
Are long-term bonds risky assets?
I think bonds are debt/loan and fixed-income, so they are risk-free, both short term and long term. But it seems like Bodie's Investment thinks long-term bonds are risky:
For example, assume that ...
7
votes
4answers
590 views
How to convince someone they're too risk averse or conservative with investments?
I have a friend who is very risk-averse, by self admission. By my standards he is too much risk averse for his own good.
He says that his personal experience over the last 15-20 years taught him that ...
7
votes
5answers
812 views
Is there a good options strategy that has a fairly low risk?
Is there a good options strategy that has a fairly low risk? It doesn't matter if it's complicated, has several legs, and requires margin.
7
votes
1answer
284 views
How do I minimize the risk of my investment losing value?
I am wondering what type of investment offers the least amount of overall risk. I know that Money Market accounts and CD's offer a low risk of reducing the principal. But they earn such low rates that ...
7
votes
4answers
314 views
How risky are penny stocks?
I've recently gotten into several discussions on penny stocks, and I intuitively know that they're far more risky than large cap companies with real assets, but is there any measure of how risky they ...
7
votes
1answer
417 views
Is there extra risk in owning an ADR vs. the underlying stock?
One of my favorite on-again-off-again recovery plays is Mittal Steel (NYSE: MT).
I buy the MT ADR there (American Depositary Receipt) because I live in the US.
Am I exposing myself to any extra risk ...
6
votes
4answers
580 views
Investing in foreign CDs, is it worth the risk?
I heard Clark Howard talking about foreign currency CDs, and so I looked and indeed their interest rates are much higher than US rates right now (3.75% for a year in Australia).
What risks are ...
6
votes
4answers
467 views
How do you quantify investment risk?
It's obvious that investing in stocks and bonds is not a guaranteed return--there is some risk, and this is well known. People talk about risk averse investors or riskier ones, or that one should ...
6
votes
1answer
123 views
How do small cap stocks perform vs. large cap stocks (like Dow constituents) during bear trends?
Does anyone have any good information on how small cap stocks, e.g. < $500M, perform during bear trends and/or recessions in comparison to large cap stocks like the Dow Jones Industrial Average ...
6
votes
3answers
341 views
What is “beta” for an investment or a portfolio, and how do I use it?
Recently my financial adviser has been talking about my portfolio's "beta". I have also seen beta listed for some investments (for example: http://www.google.com/finance?q=goog). What is "beta" and ...
5
votes
4answers
273 views
Do large market players using HFT make it unsafe for individual investors to be in the stock market?
Similar to this question, but with new information concerning High Frequency Trading [HFT], see articles on HPCwire and the NY Times citing that HFT accounts for 73 percent of all equity trading ...
5
votes
1answer
242 views
What are the risks associated with leveraged trading accounts?
What is a leveraged account and why is it mandatory on some trading platforms to operate through leverage?
Also, what are the associated risks? Could I end up losing more money than I invested?
5
votes
2answers
749 views
Effect of a “Bond Bubble” Bursting?
Lately I've heard increasing talk that the next big bubble that will burst in the US is the "Bond Bubble". Consider this recent Wall Street Journal article. Excerpt:
But in the same investment ...
5
votes
3answers
172 views
Strategies for saving and investing in multiple foreign currencies
My wife and I are both expatriates and our financial situation is complicated by having accounts in different currencies. A frequent topic between the two of us which accounts are the best for keeping ...
5
votes
2answers
449 views
Is there a return-on-investment vs risk graph anywhere?
Is there anywhere a graph of "return-on-investment" vs "risk" for various different investments?
On this graph would appear several data points, like:
"Short-term deposit in dollars", 1% ...
5
votes
3answers
92 views
Can the risk of investing in an asset be different for different investors?
If 2 people invest the same amount in the same asset at the same time, will their risk be different if they use different risk management strategies?
Say Inventors A and B both buy 1000 shares in ...
4
votes
1answer
342 views
Is socialtrend.com or/and feelthetrend.com legitimate?
I'm not particularly literate about finance and market. One of my friend invited me in a 1-hour meeting about this Social Trend marketing of TheTrendSocial.com. Apparently buying one of their "kit" ...
4
votes
2answers
428 views
Options for risk-free investment or savings over one and two years?
I converted my IRAs to Roths last year, and with the extension of the tax cuts*, I've decided to split the tax burden over 2011 and 2012, even though I can afford to pay them for 2010.
Given that I ...
4
votes
1answer
248 views
What are useful indexes for rapid evaluation of country investment risk?
The World Economic Forum released their Global Competitiveness Report yesterday and it offers a comprehensive view of individual country risk/reward. There has been an explosion of these types of ...
3
votes
6answers
880 views
For a mortgage down-payment, what percentage is sensible?
In Australia, even after the global financial crisis, it's still common to only have 5-10% and some people even use other assets as collateral to borrow all 100%. I hear historically this has not been ...
3
votes
4answers
454 views
Investing in dividend-yielding stocks with money borrowed from margin account?
I am getting ready to invest some of my savings in a stock brokerage account. The well-known brokerages, e.g. ETrade, Ameritrade, etc, have relatively high margin interest rates for the level I am ...
3
votes
2answers
155 views
How to analyze risk of a bond?
If given the screen below as an example, how would you analyze the risk of a bond? I am not sure what to look for to know if this is a good investment.
What risk factors should be considered when ...
3
votes
2answers
143 views
What's the least risky investment for people in Europe?
I have a few thousand euros in a bank deposit and I was wondering where I should invest them, considering that I won't want to take much risk? I am ready to accept the lower ROI than investing the ...
3
votes
4answers
185 views
Standard Deviation with Asset Prices?
I am looking for risk measures such as standard deviation for asset prices such as stock prices and index fund prices. It would be a trivial task if I had the data but since I do not have the data I ...
3
votes
2answers
80 views
What risk of a diversified portfolio can be specifically offset by options?
I have been reading articles on portfolios and options. It seems options are used to hedge portfolios for multiple risk factors.
I would like to know why options, and why not futures?
What is the ...
3
votes
1answer
217 views
Are short-term bond funds subject to the same risk as long-term bond funds?
So much in the news about inflation, and interest appreciation dooming long-term bond funds. Are short-term bond funds affected by the same risk? Does this make investing a portion of your portfolio ...
3
votes
1answer
439 views
What are the risks of associating your PayPal account to your bank account?
What are the risks of associating your PayPal account to your bank account?
3
votes
1answer
72 views
How prevalent are futures in the agricultural industry?
I realize that many agricultural companies sell their crops or livestock via futures contracts to manage the risks inherent to their industry. It seems to me that this kind of activity would be ...
3
votes
1answer
66 views
Is there difference in risk between physical or synthetic replication of an index by an ETF?
I understand that there are different ways to manage an ETF. Some use physical replication where they seem to buy the actual stock to track the index it is following. Others use synthetic replication ...
3
votes
1answer
86 views
How are derivatives treated in bankruptcy?
If I am a counterparty to a contract (swap, cds etc.) with an entity that went bankrupt and I am due some payment, how "senior" is my claim (amongst the other creditors where do I rank)?
I'm sorry if ...
3
votes
1answer
295 views
Return vs. Risk Graphing web site alternatives to RiskGrades, which is closing?
Risk Grades' free website (riskgrades.com) is closing 6-30-11. Do you know of a similar site that allows the user to enter several ticker symbols (funds or stocks) and obtain a graph showing relative ...
2
votes
3answers
131 views
Is it always sane to follow inaction if the only alternative investment carries a risk of higher than 50% to end up with loss?
Or is there a theory that proposes inaction is worse?
2
votes
2answers
74 views
Company Payment Card
What are the risks of having having a company payment card? Is there any reason to have a card if I can float my expenses until they're reimbursed?
2
votes
3answers
160 views
Understanding Interest Rate Risk: What is it, and what techniques do I use to minimize it?
I'm looking to develop a fixed-income account of bonds and dividend-paying equities. I've heard that bonds are susceptible to interest rate risk, but I don't really understand what that means.
What ...
2
votes
1answer
90 views
Asset protection: When should an individual seriously consider shielding their assets?
I keep hearing people talking about asset protection, and that in any serious business venture you're bound to get sued. Due to limited resources, people are bound to delay their protection strategies ...
2
votes
1answer
41 views
How can I estimate the sensitivity of a bond ETF's price to interest rate changes?
Is there a standard method for estimating the sensitivity of a bond ETF's price to interest rate changes? Some of the information I have includes the average duration and the SEC yield.
2
votes
1answer
40 views
Do we know the simulated shocks used in EU bank stress tests?
The official document released only contains the outcomes of the stress tests. Does anyone know what shocks were specifically used? Was that information publicly released?
Please note that the fact ...
1
vote
1answer
94 views
Understand interest rate risk on a bond
I was wondering why there is interest rate risk on a bond that a financial services firm has sold, besides default risk on the bond? As far as I know interest rate risk means the risk that ...
1
vote
1answer
108 views
Will bonds (including international bonds) be able to offer more than 7% annual return?
I am presently getting a 6% return on my savings in a high-interest account, calculated daily, paid monthly. I regard stocks as too risky for my 4 year savings plan but am interested in bonds as they ...
1
vote
1answer
288 views
Tax lien investing: Possible in Canada?
I was just reading on the tax lien investing process and how it works in the United States.
I was wondering if it happens in other countries. In specific, I would like to know if it happens in Canada ...
1
vote
1answer
49 views
What are good books to learn about risk associated with a particular purchase or investment?
Are there any good books that teach the beginner how to estimate the risk associated with a particular purchase or investment?
Qualitative and quantitative methods would be a nice starting point.
0
votes
4answers
130 views
Is it possible to quantify the probability of sudden big movements for a high-volume stock?
As an example: Over this past weekend, from Friday close to Monday open, Netflix (NFLX) dropped about 36% in stock price. Going back to July, Netflix was trading near $300, and now it is at about ...
0
votes
0answers
19 views
Research related to Price/Book vs the Q ratio
I understand how the Q ratio shows how over- or under-valued corporate equities are relative to the assets held. In theory, you can expect corrections in the market prices or the asset values or both, ...
