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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4answers
232 views

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
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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
237 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
70 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
148 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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0answers
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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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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
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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
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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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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
103 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
59 views

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
119 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
154 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
368 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
169 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
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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
57 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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0answers
164 views

Why many travel insurances don't cover country of nationality?

It seems that it is common practice among many (but not all) travel insurance companies to exclude country(ies) whose nationality the traveler possesses (even if the traveler does not live in his ...
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1answer
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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
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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
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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
343 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
156 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
127 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
280 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
437 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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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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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
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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
302 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
472 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
168 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
191 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
539 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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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 ...
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106 views

Ordering forms / areas of investment by risk

I have studied investing for a short while and would like to test my knowledge by asking a question about this ordering from lowest risk to highest risk of investment opportunities: Government backed ...
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2answers
333 views

Are mutual funds composed of bonds really as low-risk as the bonds themselves?

I live in the US. I often see advice that a retirement savings account should include a combination of stock mutual funds and bond mutual funds, with the relative weights depending on the years to ...
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1answer
2k views

Risk free rate formula breakdown

In risk free rate formula below why is 1 added on numerator and denominator and the value is substracted by 1 Rf = (1+nominal risk free rate)/(1+inflation) -1
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1answer
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Funds managed by companies that go bankrupt?

With all the talk of Wells Fargo looking pretty shaky, what's the deal with people that have investments through them? It's their fund, but it's not really in them? What happens to holders of ...
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7answers
5k views

Losing Money with Norbert's Gambit

In attempt to avoid the usual 1.5-2% exchange fees levied by brokers, I perform Norbert's gambit: I purchase DLR.TO in CAD (Canadian dollars) from TSX, journal it over to DLR.U.TO, and then sell the ...
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2answers
241 views

Is an Income Mutual Fund a good alternative to a savings account?

From what I've seen Income Mutual Funds, particularly an Index Income Fund, are relatively safe with a return greater than any 'guaranteed' return investment option. Obviously the actual return is ...
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1answer
11k views

What is the risk-neutral probability?

I discovered how to price European options and stumbled over a term and an equation I didn't understood : If we assume that investors are indifferent to risk and that expected returns on all assets ...
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2answers
270 views

Diversify across multiple brokers?

Right now my brokerage account has a non-trivial fraction of my total assets. It's all in a single account with Interactive Brokers. I know in theory customer funds and assets are ring-fenced, but ...
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3answers
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Should I be worried that I won't be given a receipt if I pay with cash?

I'm getting an aftermarket accessory installed on my car by an individual. The person has actually been recommended to me by a big dealership in my area and this person seems to be pretty reputable ...