You have to analyze various investing and trading opportunities in securities market and undertake only those transactions that offer more expected return for more risk.
securities markets do not offer every opportunity with the rule that more risk means more expected return. The opportunities in the market are offered by people like you only. There is no reason for them to calculate and offer you a proper opportunity always.
If you are a rational buyer or a rational seller, you have to analyse the opportunity. You may employ an advisor or an analyst to help you.
The subject of security analysis is created to help you in this endeavour.
Finding average and standard deviation of past data of returns is one alternative to evaluate the risk and expected return. The average of the past data is taken as an estimate of expected return in the future.
Saturday, November 17, 2007
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