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Business Finance - Investment Risk

The document outlines the objectives of understanding investment risks, including their types and ways to minimize them. It distinguishes between systematic risk, which affects a broad range of assets, and unsystematic risk, which is specific to individual assets. The importance of diversification as a risk management technique is emphasized to protect against unsystematic risk.

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Divina Grace Rodriguez - Librea
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104 views15 pages

Business Finance - Investment Risk

The document outlines the objectives of understanding investment risks, including their types and ways to minimize them. It distinguishes between systematic risk, which affects a broad range of assets, and unsystematic risk, which is specific to individual assets. The importance of diversification as a risk management technique is emphasized to protect against unsystematic risk.

Uploaded by

Divina Grace Rodriguez - Librea
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Ways and

means
to minimize
investment
By: Divina Grace R. Librea
objectives
After going through this module, you are expected
to:
1. 1. know the investment risk and its types
2. 2. evaluate and list ways to minimize or reduce
investment risks in simple case problems
3. 3. explain the importance of diversification
WHAT IS
RISK?
- defined as a chance of loss.

- it is the chance that the


actual return would be
different from the expected
return on an investment..
2 Fundamental Types of
Risks
1. Systematic Risk
- has effects that are wider in
scope. It is almost impossible
for an investor to avoid this
type of risk.

Example: natural disasters


2 Fundamental Types of
Risks
2. Unsystematic Risk
- also referred to as specific
risk, which affects only a small
number of assets.
Example:
a. a firm whose employees went
on strike
b. a major stockholder getting
involved in a crime or scandal
Investors resort to
diversification which is a
risk management technique
wherein an investor
includes a wide variety of
assets or investment
products in his portfolio of
investments to minimize or
protect themselves from
unsystematic risk.
STRETCH YOUR
FINANCIALLY INCLINED
MIND
Directions:
Arrange the jumbled words
to find the terms being
described by the clues
provided.
1. CAMETSTISY
Clue:
The effect of this risk is wider in
scope.

Answer: SYSTEMATIC
2. LOFITOROP
Clue:
A collection of financial assets which
an investor has decided to invest in.

Answer: PORTFOLIO
3. TRENUR
Clue:
Expected outcome or earnings from
an investment

Answer: RETURN
4. FIVERCADVISOTIN
Clue:
Risk management strategy of combining
variety of assets to reduce risk

Answer: DIVERSIFICATION
5. SIRK
Clue:
The chance of not realizing
expected returns.

Answer: RISK

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