Question

1-risk and portfolio

How we decrease the risk in a portfolio? What actions should we follow?

2-investor and stock markets

What is the biggest fear for an investor? In your opinion, what is it that should bother the investor the most?

Answer 1

1- risk and portfolio

Answer-

The decrease in the risk in a portfolio can be decreased by diversification. The portfolio diversification is done by allocating the assets to different classes and distributing the funds among classes based on risk.
The asset allocation is done based on the correlation between the asset classes.
The portfolio alocation is done carefully and are rebalanced in someperiodic intervals as the market conditions keep on changing.

2- Investor and stock markets

Answer-

The biggest fear of an investor is the crash of prices of the investments. The market turmoil and the fall in the prices causes the erosion of wealth. The other factors are the risks involved in the investments.

The different risks involved are

1) Credit risk - The risk arises due to the default by borrower in failure to meet obligations

2) Currency risk- The currency risk is the risk for an investor from investing in foreign country and loosing money due to adverse movement of currency

3) Financial risk - The risk is due to losing money in the investment due to failure of business investment.

The investor should bother about the investment that he has made will cause losses and will cause erosion of wealth.