Risk Mitigants in Syock Investments.

Week 9.

Investors are risk averse but not totally. Ross et al (2010) says that investors seek to maximise returns while minimising risk. Minimising of risk comes in various ways. This is evident in the mix of the portfolio of the investor. I usually invest in share and stocks. I normally prefer to buy treasury bills and some share, over the years, the shares of stocks in Nigeria fell so drastically, that shares fell over a thousand percent. It was quite bad. Though l lost quite a lot in shares to the point the total balue now is so negligible that l have not looked at shares in the past 4-5years, but my TBs investment has remained stable over the years. Though my investment is small, it has helped "consoled" me that at least l did not lose completely.

Standard debiation assist in choosing low risk assets by looking at the historical volatility using the dispersion set of data from its mean. (Investopedia. 2015).

Modern portfolio theory by Harry Markowich's theory in helping to evaluate various returns of portfolios at various volatility. (Ross et al. 2010). It also assist in choosing assets with low or negative covariance eg stocks and bonds. (investopedia. 2015). Capital market line is another form of risk measure whereas the risk increases, the return also increases. (Ross et al. 2010). CML uses the standard deviation to evaluate returns.

Some of the ways investors can mitigate risks include (Wells. 2014):

1. dollar based investments.

2. market risks eg holding more cash, hold short positions and hold diversified portfolios of cash, bonds and stocks that react differently to market volatility.

3. Industry risk mitigants that intensely diversifies securities by sectors and industry. For example buying stocks in pharmaceuticals, telecom etc. I lost money in stocks because my investment then was mostly in the Banking sector. I invested in different banks rather than in different sectors. This has taught me better now.