By The level of investment in stocks, bonds, commodities, and even commodities futures, is often a sign of the level of awareness and risk aversion. For example, if you’re a long-term investor and you are not fully aware of the consequences of the market, you should think twice about whether you’re truly ready to put your money on the line.
There are two types of investors: those who are aware of the market and are fully invested in it, and those who use the market in the most transparent manner possible. In my opinion, the latter are more likely to be risk-averse when it comes to market risk.
A more recent study by the Federal Reserve found that the majority of the stock market investors are risk-averse and the majority of the bond market investors are risk-averse. As the study states, “The risk aversion of the stock market is a reflection of the general lack of awareness regarding the risk associated with stock-based investment.
This same study showed that about half of the bond market investors are risk-averse and half are risk-seeking. So the majority of the bond investors are in the same boat as the stock investors. The difference is that bond investors are probably more aware of the risk associated with bond-based investment.
The difference between bond and stock investors is similar to the difference between the risk-averse and risk-seeking types that we discussed in the previous section. The bond investor is likely to be more aware of the risk associated with bond-based investment. The downside is that there is a greater opportunity cost when deciding whether to invest in bonds or stocks. You might consider investing in bonds before you invest in stocks because bonds offer a lower risk profile.
The risk-averse type might say, “I’m taking an investment that has a high risk, but a low probability of a significant return.” Well, the stock investor might say, “I’m taking an investment that has a low risk, but has a high probability of a significant return.” But when it comes down to it, the risk-averse investor won’t be in a position to make a good decision.
This is a similar theme from one of the questions we were asked at the time of our survey. The risk-averse investor is often in the position of having a high-probability of achieving a loss, but a low-probability of making a good decision. But remember that the risk-averse investor is also in the position of having a high-probability of achieving a loss, but a low-probability of making a good decision.
This is a good problem to have. The risk-averse investor is in the position of having a high-probability of achieving a loss, but a low-probability of making a good decision. This is why they are often so cautious about investing in stock markets.
Yes, it’s true. The risk-averse investor is all about having a high-probability of achieving a loss, but a low-probability of making a good decision. They take a very wide view of what risk is. They want to keep their portfolio as small as possible, without being overly cautious with their funds. This, coupled with their desire to maximize the probability of making a good decision, they tend to be risk averse.
