Risk and Return in Finance and Investments

For COURSES & COACHING, visit www.realestate...
For COMMERCIAL LOANS, visit www.evergreen.llc
---
Understanding the relationship between Risk and Return in Finance and Investments.
Frequently my students will ask me about RISK, or how risky a particular investment is, and also how to evaluate risk. It can be a tricky one to understand, but the basic concept is: risk is the amount of variation in results that you might get if you had invested in a similar investment many, many different times. Would you get the exact same performance and the exact same desired return every time, or would it be wildly variable? The more variable your potential results are, the more risk you're undertaking.
Let's take a look at that graphically. The first thing is what we like to call the Band of Investments, and over here, if you have what is considered risk-free, or very low risk, such as treasury bills or other guaranteed investments, these are going to be considered low risk. And on the other end, you have high risk. In today's world, probably cryptocurrencies, junk-bonds, those would be the high risk types of investments, where you don't really know what's going to happen. And somewhere in the middle, we have real estate.
Now let's take a look at how risk looks like when it's quantified. Imagine this graph represents your target results. In other words, zero would mean no variation from what you expected. It didn't perform more positively or more negatively than you expected. You got exactly the return that you wanted. Imagine you're investing in treasury bills. There's going to be no variation whatsoever. If you invested in t-bills a hundred times, you would see no variation in your results.
Now, let's look at the other end on a higher risk investment. A higher risk investment, if you invested in that same thing multiple times, depending on when, or how, how much, what time of the market you were getting into that investment, you may see extremely positive results, you may see results kind of around what you expected. You could end up seeing highly negative results. The point is that risk means a greater standard deviation in your potential results. The lower the standard deviation, or if there's no standard deviation, that would be risk-free. If there is wide standard deviation in your potential results, that would be high risk.
This concept holds true throughout the world, it's not just related to t-bills, or real estate, or others, but it works for stocks, or development projects. Just know that risk and reward are correlated, and the higher the risk, the higher the return that an investor is going to require.
#realestateinvesting #realestate #TrevorCalton #realestatefinance #investing #commercialrealestate #commercialloan #commercialloans #apartmentloan #multifamilyloan #apartmentinvesting #multifamilyinvesting #EvergreenLLC #stepbystep #stepbysteptutorial #diagram #example #download #freedownload #howto
Risk and reward
Risk and return finance
risk and return investment analysis
risk assessment