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What is the definition of risk in investing?

Risk is the chance of losing money or earning less than expected.

What does return refer to in an investment context?

Return is the profit or gain from an investment, usually expressed as a percentage.

What is the general principle of risk and return?

Higher potential return equals higher risk.

What is market risk?

Market risk is the risk that prices go up and down due to economic or political events.

Define business risk.

Business risk is the risk that company profits may fall due to poor management or competition.

What is liquidity risk?

Liquidity risk is the difficulty of selling an investment quickly without loss.

How do interest rates affect investment returns?

Changes in interest rates can affect returns, particularly for bonds.

What is inflation risk?

Inflation risk is the risk that rising prices will reduce the real value of returns.

What is credit risk?

Credit risk is the risk that a borrower or company cannot pay back money owed.

What are capital gains?

Capital gains are profits from selling an asset at a higher price.

What are dividends?

Dividends are a portion of a company's profit that is paid to shareholders.

Define interest income.

Interest income is earned from lending money, such as through bonds or savings.

What formula can be used to calculate total return?

Total return equals capital gains plus income (dividends/interest).

What is the relationship between risk and return?

Low risk usually equals low return, medium risk equals medium return, and high risk equals high return.

What is diversification in investing?

Diversification is the strategy of spreading money across different investments to reduce risk.

Who is a conservative investor?

A conservative investor prefers safety and steady returns.

What characterizes a balanced investor?

A balanced investor mixes safe and growth investments.

What is an aggressive investor willing to accept?

An aggressive investor is willing to accept high risk for high potential rewards.

What is a managed fund?

A managed fund is a pool of money that is invested across multiple assets.

Why is diversification important?

Diversification reduces risk because poor performance in one area may be balanced by gains in another.

What is the risk-return principle?

The risk-return principle states that higher potential returns are associated with higher risks.

What types of investors are typically suited for growth assets?

Younger investors are typically suited for growth assets because they have time to recover from downturns.

What are defensive assets?

Defensive assets are investments that focus on protecting wealth and providing stable, reliable income.

What is the purpose of a defensive asset portfolio?

The purpose of a defensive asset portfolio is security, capital preservation, and steady income.

What is an aggressive portfolio?

An aggressive portfolio consists of 80–100% in growth assets like shares and property.

How does a balanced portfolio differ from an aggressive portfolio?

A balanced portfolio typically has about 60% growth assets and 40% defensive assets, while an aggressive portfolio has mostly growth assets.

Why is it beneficial to mix growth and defensive assets in a portfolio?

Mixing growth and defensive assets helps to achieve long-term wealth creation while providing safety and income.

What is a dividend in investment terms?

A dividend is a portion of a company's profits that is shared with shareholders.

What can lead to low risk and low return investments?

Investments like bank savings accounts and government bonds typically have low risk and low return.

What does the term 'inflation risk' imply in investing?

Inflation risk implies that rising prices can reduce the real value of investment returns.