fin 325 chap 1-

whyy do we invest

We forgo consumption now to save and invest. investosrs seek to manage thier wealth effectivly amd obtain the most out of their asets while also protecting them form inflation taxes and other factors

retirement plans now

Focused on defined contributions and how much a retiree has is dependent on how much they save, and what they are invested in

professions in investments

investments bankers, trades security analysts, portfolio managers stock brokers and finachial advisors

investment decsisons

are driven by risk appeite and expected return

risk vs return trade off

cash has an opportuniuty cost by forgoing the opportuinty to earn a return on that cash

purchasing power can be eroded by inflation e

expected return

the ex ante (before the fact) return ecpected by investors over some future holding period

realized return

Actual return on investment. a realized return is ex- post- after the fact

Investors seek to maximize their returns from investing subject to the risk they are willing to incur. an investors primary constraint is thier willigness to take risk

risk

uncertainty about the actual return that will be earned on an investment

risk averse investor

will not assume risj unless there is an expectation of adequate