RISK AWARE INVESTMENT GUIDE FOR EVERYONE

  Let’s summarize the 5 key one-size-fits-all steps to investing without diving into anything math-related: 1. Begin with a direct stock purchase plan (DSPP) and/or index funds passively managed by a robo-advisor. M any companies offer  dividend reinvestment plans (DRIPs)  that further simplify the investment process. DRIPs automatically buy more shares on your behalf with your dividends. If you reinvest dividends, you can supercharge your long-term returns because of the power of  wealth compounding . This is  dollar-cost averaging (DCA)  in action.    2. Focus on asset allocation using the money you won't likely need within the next 5 years. 3. Y ou'll need a specialized type of account called a brokerage account to actually  buy stocks, mutual funds, and ETFs.  The majority of  online stock brokers  have eliminated trading commissions while offer ing the ability to trade on foreign stock exchanges. Ther...

      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...