How would you define risk to someone who doesn’t have a grasp of investment fundamentals? Do you think the best definition is “Risk is the chance of losing money”? Explain.
Answer to relevant QuestionsHow many securities must you hold for adequate diversification? Does diversification eliminate all risk, or does some remain? Explain. What sources of risk are associated with the overall economy? What sources are associated with individual issuers of securities? Explain two perspectives of the relationship of risk to time. Explain dollar cost averaging and why it may be helpful for certain investors. What is a dividend reinvestment plan, and what advantage does it offer? Also briefly explain several other routine investment techniques. Compare a regular cash dividend with a periodic share repurchase. Which has greater appeal to you? Explain. Is a bond a loan? If it is, who is the borrower and who are the lenders?
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