Expert Zone

Straight from the Specialists

A quick guide to understand your risk profile

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

“Risk is a part of God’s game, alike for men and nations” – Warren Buffett

It is a known fact that practically all investments have a certain degree of risk. But the irony is that though we are aware of this, most of us aren’t really clear about what exactly this risk means and how do we go about measuring our own risk-taking ability. Here is a quick guide on what exactly risk means and how to determine your risk appetite.

MEANING OF RISK
The term ‘risk’ indicates the variability of rate of return, or the amount by which the investment outcome deviates from its expected value. If this sounds too technical, here is a simpler explanation. Risk is the possibility of your money increasing or decreasing in value from your expectations of the investment. So wider the range of possible outcomes, the greater is the risk you experience.

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