Almost all investing involves some degree of risk. Investment is a commitment
of money with the expectation that additional money will be generated in return.
It requires some sacrifice now in return for a future uncertain benefit.
Analysts define risk as variability of return or in other words, it is the possibility
that the actual return from an investment will differ from the expected return at
the time the investor purchases the investment.
The wider the distribution of returns (the greater difference between actual and
expected returns), the riskier the investment.
Today's investment environment offers a wide range of choices with different scales
of risk but generally, investors are categorized under two key approaches - passive
or active.
An investor usually obtains higher returns when his dominant assets are invested
in investments that carry more risks (active approach). In particular, investors
in the local speculative Second Board quite often generate more attractive returns.
In other words, active investors adopt a more vigorous style in selecting their investment
types.
Active investing is often more difficult and time consuming but the payoff is usually
high. Active investors frequently in and out of the market as the market changes
and are required to monitor the performance of their investment portfolios more closely.
Lower risks investments generally offer investors lower rates of return. A less aggressive
investor normally delivers fewer returns but will enjoy stable income flows over
a longer time frame (passive approach).
