Risk

Hello boys and girls.

Today Mr Lobo is going to talk about RISK. why is the boardgame call risk? it is becoz you need to roll the dice everytime you attack/defend. rolling the dice is all abt luck, sometimes you win sometimes you lose.
it is becoz of this uncertainty of rolling dice that the boardgame is call RISK, becoz everytime you roll the dice there is a chance of losing.

Everytime i tell ppl i do forex trading, they will sure ask me not risky meh? or they think that i am a high risk taker? I am a very kia su kia si very low risk person, but to talk abt risk we must first understand risk. ok now boys and girls can anyone tell me what you all know about risk? ............... any good answers?

many people always says higher risk equals higher returns, and some ppl think abt risk management as dollars and cents. but if you cant define what is risk, you can never manage your risk or say anything is higher or lower risk.

Here are some dictionary definations of Risk from wiki.

The chance that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment

A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk. 



For example, a U.S. Treasury bond is considered to be one of the safest investments and, when compared to a corporate bond, provides a lower rate of return. The reason for this is that a corporation is much more likely to go bankrupt than the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return.

This seems to be the best explanation for risk and higher risk higher returns.

Based on pure paper explanation

Risk is probability of a event which result in a loss.

Risk management is reducing the probability of the event to happen or reduce the impact of the event

Now everyone aggre with what i said? ok now that we know the meaning of Risk and Risk management.

We are able to manage our risk better, But is it really true that stocks/bonds/funds are lower risk then commedities/futures/forex? many ppl assume forex/futures/commedities/speculate/trading is high risk and stocks/bond/bills/insurance/funds/unit trust is low risk.  take a look at the photos below, all of them are 1 year chart i taken yesterday 2 Sep 09.

STI

Gold

Google

US bond

Aberdene fund ( everyday see the adv on MRT, talk like so zai, 10% yearly still dare to sell this shit)

Oil

DBS

Dow

EURUSD

Are you able to tell which chart is without looking the names? nobody can! this is because they all look the same. 1 line moving up and down in random. If they all look the same and move the same, then how can anyone says which is higher or lower risk? they cant becoz they are all the same.

It also depends on the time you enter the market, if you buy at low and manage to sell at high. then you will tink its low risk, but how abt ppl that buy when high and now price fall so low. they will say this is for long term investment. and even if price had been moving up for the past few hours, doesnt mean that it will go up in the next minute. If price go down and you holding a long position you will say its high risk, but what if you holding a short position? you will say it is low risk.

most people only think they know wat they are doing but the fact is they dunno anything and they just assumed becoz everyone is saying or doing it. Sad to tell you the truth but if you dunno wat you are doing then you are GAMBLING! and yes gambling needs lots of luck. Hope i can given you a insight on what risk is excatly, i just hope you think more into managing risk because RISK is not that simple. it is also not just about losing money. think abt it. Good luck