RISK AWARE INVESTMENT GUIDE FOR EVERYONE

      It is all about Min(Risk)/Max(Return) Higher risk is associated with greater probability of higher return and lower risk with a greater probability of smaller return , as illustrated in Figure 6. Generally, the  R isk /R eturn trade-off  is calculated with the the aforementioned key drivers of returns in combination with Risk FMR   such as STDEV, Alpha/Beta, the Treynor/Sharpe ratio,   VaR/CVaR, R-squared, DCR,   DER, ICR, and DCL. Let’s say we have to select either TSLA or AAPL based upon current EPS and STDEV values (Q4 2021): Table 14 : Example EPS and STDEV for TSLA and AAPL. Stock EPS $ Q3 2021 STDEV Q4 2021 TSLA 1.86 3.56 AAPL 1.3 1.54   Even though EPS(TSLA)>EPS(AAPL), your investment in TSLA would be considered   much more risky than that in AAPL because STDEV(TSLA)/STDEV(AAPL)~2.3.   For instance, in the...

  Let’s focus our attention on Risk that involves multiplying the loss/impact/severity and likelihood or probability [16] Risk = Impact * Likelihood, where Likelihood is the possibility of a risk event (negative or smaller than expected return) occurring, whereas Impact signifies beneficial or harmful effect of a risk event on the investment objectives. According to the proposed TLS, we will define the following Likelihood and Impact Low, Moderate and High scores. Table 1 shows that the risk severity matrix is a square containing 9 colored boxes in a 3x3 pattern. On the left are the Likelihood Levels, which is how we rate the likelihood that the event will happen. On the top are the Impact Levels, or severity if the event occur. Likelihood and related Probability P goes from Low (at the top left) to High (at the bottom left): Level 1 (Low) Not expected, but possible (P~0.25+/-0.2); Level 2 (Moderate) May occur sporadically (P~0.5+/-0.2); Level 3 (High) Likely to occur soon and repe...