Questions tagged [risk]

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 endeavor carries some risk, but some are much more risky than others.

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1answer
28 views

For a mutual fund - if jensen's alpha keeps increasing with time, then how does beta of the mutual fund get impacted with time?

I am building an excel model to calculate rolling alpha at a monthly level to analyze different equity mutual funds. Along with the rolling alpha, I am also calculating rolling absolute returns and ...
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1answer
42 views

Is it necessary to have different asset allocation for short-term needs?

I'm in my early 20s and have 60K in retirement accounts and 80K in taxable accounts. Both are invested in low-cost mutual funds, 80/20 stock/bond split (specifically 60% VTSAX, 20% VTIAX, 20% VBTLX). ...
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2answers
195 views

Is there any risk in keeping lots of assets with one broker? [duplicate]

I'm in the USA. Currently, the bulk of my net worth is in accounts with TD Ameritrade. Right now, that's only about $30,000, but I plan to keep contributing; hopefully in a few decades, I'll have a ...
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Given wrong POS machine receipt, should I be worried?

I was shopping today and paid with a local bank debit card (not Visa, MasterCard or some international card, just an ATM card issued by a local bank). Normally there would be 3 identical receipts and ...
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1answer
171 views

Outsourcing rental risk: selling right to rent house?

I am wondering whether there is a way to get rid of the risk associated with renting a property one owns by selling the right to rent that property for a certain period? I am especially interested in ...
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2answers
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Is it safe and smart to keep all your money in SAVINGS account in India? [closed]

I am a Software Engineer by profession and passion. I am facing problems with chosing how shall I invest my money. I have worked for 3 years now, and have around 40 lacs INR total earnings which I ...
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6answers
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Is putting money in a 401(k) plan risky?

I've been working for a company that offers me a MassMutual 401(k) plan as a benefit. The employer's match is 50% of my contribution. I've contributed 3% of my gross salary to the plan, and planning ...
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2answers
154 views

How to enter an order to buy or sell stocks with the intent to cancel without risk?

There was a market crash in 2010, in that it is alleged that the scammer entered the sell orders with intention to cancel. With my experience, once I enter an order( limit or market) with a ...
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1answer
73 views

Would deflation further stress the Federal Government's Balance Sheet? Would this put in peril Debt payments and Social Security benefits?

I would like to know if deflation would represent a risk to Debt (bond) payments and Social Security benefits. To my understanding, Social Security is only indexed when there is positive inflation. ...
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Is high return and low risk possible?

In finance, we often see that high return instruments should be accompanied by high risk. Is it possible to have a high return and a low risk financial instrument?
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Options trade - statistically expected return calculation?

I also asked this question here, for it to get more visibility. I am calculating expected return for composite option strategies based on event probabilities provided by the broker. For example, ...
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4answers
2k views

How invisible hand adjusts stock prices if company is listed on multiple exchanges, under multiple currencies, and one of the currencies plunges?

I'm an absolute beginner in economics and in the stock exchange and just encountered my first company that was listed in multiple stock exchanges and in multiple currencies. I'm aware of the invisible ...
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2answers
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Is it risky to move from broad geographical diversification into investing mostly in less developed markets?

I currently invest in a handful of index funds that includes U.S. equities, U.K. equities, some emerging markets, and some Asian equities. But I have in mind that the West is eyeball deep in debt, ...
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3answers
246 views

Should we consider real estate investment low, middle or high risk?

Should private investors investing in a specific (that is, not through some fund) real estate treat it as low, middle or high risk? Issues I consider: It's true that things move slowly in real ...
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1answer
71 views

Franchise expected survival/failure rate [closed]

What are good stats about the rate of survival/failure of franchises? I get to hear that McDonald's restaurants tend to live longer than Subway's, but don't know how reliable that is. Around me, I ...
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2answers
151 views

Lowering mortgage downpayment vs Investing in stocks? [duplicate]

I live in a country where currently mortgage interest rates are historically low (around 3-4% for 300K 30 years mortgage, and the interest is also tax deductible), and the banks are willing to finance ...
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What do I need to know about investing in developing countries?

My wife is Sri Lankan and we have some cash assets there, but we both live in Australia. Sri Lanka has restrictions on taking money out of the country - essentially it looks like you can only take $...
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5answers
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Who buys a weak currency?

Suppose I want to convert Zimbabwean dollars into US dollars. Who will buy the Zimbabwean dollars from me? That is, why would they ever agree to change their valuable US dollars into the less valuable ...
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1answer
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Yield on municipal bonds versus treasury

I'm looking right now at the yields in Municipal bonds and Treasury bonds on Bloomberg: https://www.bloomberg.com/markets/rates-bonds/government-bonds/us and I see that yields on Municipal bonds are ...
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6answers
9k views

How risky is real estate?

I have a friend who plans to retire by putting all of his money in local real estate. He makes a huge return on investment on the property he has now - something like 25%. Fundamentally, I think ...
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2answers
171 views

Is there any data on the degree to which confidential financial information is taken from trash and then used fraudulently?

This question is prompted by How to Safely Destroy a Large Quantity of Valid Blank Checks. For decades, I've put torn up confidential financial information into the garbage (not the recyclable trash),...
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0answers
34 views

Computing risk-neutral probability of spot rates

I am trying to use a binomial model to price options wtih bonds as the underlying security.If the current term structure is flat at 6%, but next year, I assume the one-year spot rate will be either 5% ...
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1answer
121 views

Risks and threats in signing empty SSA-89 form

A financial institution is asking to sign form SSA-89 which is used for verification of the social security number assigned a person. This verification is requested by a third party. The third party's ...
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1answer
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How to properly tune insurance deductible/excess for risk appetite

We all know you can arrange a higher deductible (USA) or excess (UK) to pay a lower insurance premium. My question is, is there an established method to identify what is the optimal size of ...
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1answer
121 views

Holding shares of company filing for bankruptcy

I own few shares of PG&E and recently got an intimation from my broker regarding the chapter 11 bankruptcy filing by PG&E. However, I also see the stock price going up for some reason. I ...
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1answer
156 views

What are the risks with investing in private real estate funds via Fundrise?

I recently discovered this real estate investment company, Fundrise, and after doing some research, I’m interested in investing with them. But I’m on the fence about the trustworthiness of their ...
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6answers
380 views

Rational risk-assessment decision framework: Should I buy health insurance?

Update: I've posted a sub-question on the math stack exchange to help answer part of this primary question. Sub-question: Toy problem: How much should I rationally be willing to pay for this ...
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2answers
194 views

Buying ex-local authority/council properties in the UK

What are the risks of investing in ex-local authority/council properties in the UK? I am referring to purchasing from a private landlord an apartment that was built by a city council for social ...
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2answers
138 views

Investments for Higher Expected Returns

In general, investments carrying more risk and volatility provide higher expected returns than those with lower risk and volatility. A 1-year T-note will provide a guaranteed return of 2.6%, slightly ...
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1answer
69 views

Interest rate risk of bond that is held to maturity

While reading online about interest rate risk associated with bonds it stated that if an investor plans to hold a bond until its maturity then interest rate risk is insignificant since the final ...
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226 views

Why do some travel insurances exclude country of citizenship?

It seems that it is common practice among many (but not all) travel insurance companies to exclude country(ies) whose citizenship the traveler possesses (even if the traveler does not live in his ...
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1answer
84 views

Where do Master Limited Partnerships (MLP) lie on the risk/yield spectrum?

MLPs are required to pay profits to their limited partners. Dividend stocks can choose to stop paying dividends. Corporate bonds payments are fixed interest (a set number) but MLP payments are usually ...
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1answer
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How to estimate the profitability and risk of investing in rental properties?

There was a recent question, Is it a good idea, to buy a flat with a loan, whilst using the rent to pay it off?, which was closed due to asking opinion-based advice. However, the question can be ...
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3answers
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Does a bond mutual fund qualify as “bonds” for the purposes of risk management?

I am re-balancing my portfolio to be a little more conservative. I am considering taking some of what's currently in equity ETFs and putting them into VBMFX, a "Total Bond Market Index Fund". Is ...
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24answers
54k views

Why do people save so much?

When I am old and retired (70 years +), I don't plan to spend a lot of money. I'll be living in my own house that is already paid off at that point, so no rent or mortgage payments. Since I don't need ...
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7answers
6k views

Does dollar-cost averaging just means taking risk later?

I am investing in mutual funds and hence reading and trying to learn about it. I was reading this answer which says lump sum investment is far more efficient than DCA. Well, that does not surprise me....
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3answers
348 views

Risks of selecting a pension plan in the USA

I am looking at a possible employment opportunity with a state-affiliated institution in the United States. They offer a couple of options for retirement plans, and one of them is a pension plan. Of ...
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3answers
157 views

Profit reached faster then expected, what are good sell / hold heuristics?

End of January I got my feet wet into a position and added to that same positions after noticing it was doing well 3 months after. 8 months into holding the value went up by 40%+ (no major news ...
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2answers
134 views

How to balance the risk of owning one real estate?

I am about 45 years old and recently began to receive a US government pension, which I do not require for current expenses. The monthly payment is about a quarter of my living expenses, but due to my ...
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0answers
283 views

Are there speculative ETFs analogous to investment funds?

Are there ETFs that bundle up highly speculative investments with high risk/reward profiles? For instance, they might currently include Zambian, Nigerian, Brazilian and Venezuelan bonds; ...
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2answers
475 views

Why is there less buzz around IEP (Carl Icahn) than BRK.B (Warren Buffett)?

IEP is 95% owned by Carl Icahn. It most certainly passes the Skin in the Game principle Nassim Taleb likes to talk about. I happen to own a couple of shares in it because of the man's incredible ...
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8answers
1k views

Why are tech stocks risky investments?

I've seen this mentioned so much in writings about intelligent investing, but I don't understand why. Are Amazon and Netflix tech stocks?
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6answers
6k views

Why cannot LLCs be used to negate increased risks when doing leveraged investments?

Let's say that I am confident that some investment will grow by 15% per year, and that I have 10K to invest, and I'd like to use leverage to invest 100K. What stops me from creating an LLC with 10K ...
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2answers
214 views

How to determine the right level of disability insurance based on a person's lifestyle

I'm trying to determine what level of disability insurance is right for me. A thought crossed my mind: certain people experience less risk of disability. A person who works from home is at less risk ...
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2answers
304 views

What would happen to stocks during war [closed]

Let's assume if U.S went to WW3 in far or near future. If it is the case what would happen to the stocks and companies? Will the stock fall enough to the point stock would just disappear? what about ...
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1answer
502 views

How can I combine winrate, (risk/reward), and expectancy into a single formula?

winrate = wins / (wins + losses) I fiddled around with it and found that: requiredWinrate = risk / (reward + risk) Expectancy formula expectancy = (winProbability x averageWin) - (lossProbability ...
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2answers
170 views

How to mitigate 401k risk with bonds?

I’ve read that for 401k’s, you want to reduce risk as you get older and the primary means to do that is to move money out of stocks and into bonds. Assuming that principle is generally valid, then ...
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3answers
195 views

Should I spread my 401k investments across more than one broker?

After many years contribution, my previous employment's 401K account has more than 500K now. I don't like its plans which have less returns comparing with plans from other broker companies. I am ...
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2answers
540 views

Benefits of investing at different stages of the supply chain

Say that I believe that the market for electric cars will explode in coming years. What are the benefits/detriments of the following investments at various levels of the supply chain? Raw materials, ...
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15answers
13k views

Why does risk level matter?

In a perfect market, the extra losses of a high risk portfolio should exactly match the difference in returns between that and a low risk portfolio. In other words, a sufficiently diversified ...