A risky business

Successful investment depends upon an accurate assessment of risk. As financial products become more sophisticated, misunderstanding the concept could become a game of Russian Roulette

The process of investment can be simply defined as the acceptance of risk in exchange for the expectation of a return. Beyond this, it is simply a matter of how much risk an investor accepts and the price of that risk in the form of an expected return. Successful investment therefore depends upon an accurate assessment of the risk being accepted. Unfortunately risk is a very poorly understood concept among investors who would rather focus on potential returns. This problem is becoming ever-more acute as financial products become more sophisticated. Consistent definition The situation i...