Risk Aversion lesson

What is risk aversion?

A risk averse investor is an investor who prefers lower returns with know risks rather then higher returns with unknown risks.

How does risk aversion effect the stock market?

Risk aversion will effect the different stocks you would buy in the stock market because you would want to buy lower risk stocks that have lower returns but it would take you longer to earn a reasonable income to what it would if you brought stocks with unknown risks.

Can volatility and risk have a positive outcome?

Volatiliy and risk can have a positive outcome in the stock market because even though you have a smaller chance of success, it can be a lot easier and quicker to earn money by taking risks. They may involve losing value, but also involves placing your money into a stock with higher expected returns.

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