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Investment risks are an inherent factor to any investment. Investing in low risk assets with low volatility and low rate of return is a safer choice for risk averse. However,one should take into consideration that a low risk investment has a low return expectation accrdingly. Another trade off for low risk investment is that it requires less time for gathering information on the assets to invest in as well as on progress monitoring. Thus, overall portfolio construction and maintenance takes less time and effort.
Risk is one of the most important factors to consider while investing. Many investors try to choose assets for investment that are not as risky, supposing - the lower the risks, the higher the profits. Generally, in finance, risk is defined as the uncertainty of return, expected by the investor. That is to say one loses more than expected. This is the main reason why many investors prefer low-risk investment.
Low-risk investment is an investment where there is thought to be just a small chance of losing some or all of your money. This type of investment is especially suitable for those who accept their losses with difficulty. When investors choose low-risk investment, they simply see that the returns do not deviate from expectations. In case of low-risk investment one thing that should be taken into the consideration, is the fact that the relationship between risk and expectations dictates that a low risk investment is associated with a low return.
Low-risk investments are also considered to be more stable, because they are considered not to lose their value unexpectedly. Examples of low-risk investments are dividend funds, mutual funds, US Treasury bills, money market accounts, etc. Some low-risk investments are more secure than others, like US Treasury bills, which is one of the most low risk investments. However, it should be mentioned, that each asset has a degree of risk, and it does not matter how safe it may seem, anything may happen, because the markets are unpredictable.
Nowadays there are many financial experts who try to develop methods for decreasing investment risks: in other words they try to develop risk management strategies. Risk management is the necessary approach to the elimination or minimization of the level of risk, associated with an investment or business operation.
Any effective risk management strategy begins with identification of the possible risk. Once the risk is identified, it should be eliminated not to damage one's business or investment in future.