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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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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Why does the introduction of chip & pin appear to be so controversial in the United States?
The past few weeks there have been many news articles about the introduction of chip & pin in the United States; most of these articles are against it and citing such 'issues' as:
"Some people ...
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If a broad long-term investment in the stock market is such a good deal, why don't banks do the "obvious" things?
There is a fundamental discrepancy or paradox that has been keeping me, and many others, away from the stock market. Before I explain it, let me mention some selected popular questions on this site in ...
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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 ...
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How do rich people guarantee the safety of their money, when savings exceed the FDIC limit?
I am curious how a millionaire would guarantee the safety of his money, given that the FDIC only insures up to $250K of an individual's deposits at a bank.
If someone had $3 million that they wanted ...
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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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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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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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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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What are the options to beat the returns of an index fund, taking more risk?
I am young, and will start my career in about three years. I do NOT live nor have any intention of ever moving to the United States, and I will probably be based in Europe for my career and after (...
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Why should I hold stocks for the long term when the risk of more companies going bankrupt increases over time?
The longer the time frame, the larger the risk that any given company is going to go bust. If this is the case, then why is long term stock investing encouraged? Isn't it more risky to invest for the ...
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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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As a 22-year-old, how risky should I be with my 401(k) investments?
As a 22 year old guy, how should I plan my financial life regarding my 401(k) investments? How much risk should I be taking?
Also, is it a good idea to invest in a dynamic portfolio with smart beta ...
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Why would long-term investor care about volatility? [duplicate]
I'm 35 and I want to start investing for my retirement. My question is, why would you care about volatility if your investment horizon is 30+ years? In order to get a more clear picture of volatility ...
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What is the difference between hedging and diversification? How does each reduce risk?
Hedging and diversification are both used for reducing financial risks, but what are the exact differences between these two?
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Most common types of financial scams an individual investor should beware of?
We've probably all heard of the Ponzi Scheme, made famous first by Charles Ponzi and more recently by Bernie Madoff:
In March 2009, Madoff pleaded guilty
to 11 felonies and admitted to turning
...
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Why do banks finance shared construction as mortgages instead of financing it directly and selling the apartments in a building?
The numbers in this question are for a developing country, so rates may seem high, but I tried to make them look reasonably related to each other to illustrate this question. The question also assumes ...
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Why I cannot find a "Pure Cash" option in 401k investments?
I am of an opinion that I should decide where my money should get invested and if it should get invested at all or not.
When I looked at the investment options I have with my 401k money, I figured ...
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Risks of using home equity for high risk market investing
I bought a home after the market crash in 2009 and I have quite a bit of equity in it now (100k). I still have 20 years until I retire and currently my main brokerage account is very high risk / high ...
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What is this type of risk-free investment called?
My mother told me that in 1994, she had $10K to put into a savings account or CD. She went to the local Citibank and didn't like the interest rates that they were offering on their savings/CD ...
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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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When the market price for a stock is below a tender offer's price, is it free money (riskless) to buy shares & tender them?
For instance, on March 11, 2014, Jos A Bank (JOSB) agreed to be acquired by Men's Wearhouse for $65/share in cash. A tender offer to existing shareholders was set to expire on March 19th. On March ...
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Downside to temporarily lowering interest rates?
American Express sent me a promotional offer to lower the interest rate on my credit card for 12 months. I don't carry a balance on any credit cards. I can't think of a good reason to accept this ...
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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 ...
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What fraction of a portfolio should P2P lending comprise?
Based on what I understand, traditionally we are supposed to put 70% money in stocks and 30% money in bonds (based on individual age, I am 33 right now).
I have been experimenting on P2P lending and ...
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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 ...
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Moving a 401k balance to multiple FDIC-insured IRAs to protect my funds against being wiped out by a market crash?
My wife and I are living on our Social Security benefits. I've been very pleased with the growth of my Fidelity 401k in my former employer's retirement plan. As far as I know, I can leave my balance ...
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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?
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Must a company have a specific number of employees to do an IPO?
I'm interested in a job offering from a company that is going for an IPO (Initial Public Offering) in the next 6 months. It is rumored that once the IPO is done they will lay off a lot of employees ...
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Risks of using a "free" (non-fee-only) financial planner for investing a substantial sum?
I have a substantial (at least to me) amount of money from the sale of a second home. The money is momentarily in a savings account at a big branch bank in the US. The amount is such that I have ...
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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 ...
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High-risk investing is better for the young? Why?
I have heard statements such as the question's time.
Basically, it's a financial motto: "If you're young, take on more risk."
I don't really understand it. I figured risk-tasking is a personal/...
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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 ...
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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 ...
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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 one,...
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What does a well diversified self-managed investment portfolio look like?
A lot of online blogs and investing material suggest that investing in a single index is not diversified enough to avoid some types of market risk.
So the question then is, what does a well ...
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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 ...
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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 ...
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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.
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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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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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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 ...
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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 risk/...
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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 ...
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Should ETF currency risk be avoided by changing denomination or selling in a different currency?
I am about to purchase international stock and bond ETFs as part of my retirement portfolio.
I am concerned about currency denomination. Suppose that I purchase an ETF in Euros and when I start ...
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Ideal investments for a recent college grad with very high risk tolerance?
I recently graduated college and got a steady job making decent money as a software engineer/programmer. I make more than enough money to sustain myself and save up money, while still having money ...
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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 ...
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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 ...
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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 ...
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How safe are neo-banks?
In Australia there are a swath of 'neo-banks', banks that have no physical presence - typically are a 'mobile-first' experience. Some examples are Up, Xinja, 86400.
These banks are typically pretty ...
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