Risks and returns: What you should know


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Understand the connection between risks and returns in stock market. View our presentation to know how this affects your investment strategy.

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  • Kotak Securities exclusively brings you this presentation on ‘connection between risks and returns’, and how they affect your investment strategy. Kotak Securities is one of the largest share broking firm in India. Visit http://www.kotaksecurities.com for more details.
  • Risks and returns: What you should know

    1. 1. Risks and returns: What you should know
    2. 2. Weigh Risks & Returns • In your growing up years, you may recall being warned about your eating habits. You were told about the downside of gaining weight early in life after eating too many pastries. • Similarly, as you look to invest your financial surplus, you want to weigh all possible risks associated with investing. Money is precious. It never feels good to lose it, especially if it is your hard-earned money. • Here are a few things to know about the connection between risks and returns, and how they affect your investment strategy:
    3. 3. Risk-Return Trade-off • Greater the risk an investor takes, higher are the chances of returns. This also implies that there is a great chance of loss. • Similarly, lower the risk, lower the prospects of making good profits along with a minimal chance of damage. This is called the ‘risk-return trade-off’. • Because of this trade-off, an investor is forced to compromise on both risks and returns.
    4. 4. Identify Your Risk Profile • If you want to make money, you have to take on some risk. Similarly, if you cannot take much risk, you will have to settle for lower profits. • As a result of this ‘risk-return trade-off’, your risk appetite as well as financial goals affect your investment strategy to a great extent. • For this reason, before investing, you should identify your risk profile, figure out your goals and the need for cash.
    5. 5. Diversify Your Portfolio • The best investment strategy is diversify your portfolio to a wide range of both high as well as low-risk securities. The exact proportion of this mixture would be decided by your profile.
    6. 6. Where To Invest • Stock markets have the greatest potential for giving maximum returns among all financial instruments. • Debt instruments like government bonds, bank deposits have the lowest returns because they are considered the safest instruments.
    7. 7. • If you are a low-risk investor and yet you want to take a calculated risk, you could invest most of your funds in debt instruments like bonds and fixed- deposits. • At the same time, you invest a small portion – say 10% -- of your corpus on equity-based mutual funds or a select few stocks. • The reverse also holds true if you are willing to take high risks. The limited exposure to low-risk assets will help act as a buffer during poor market conditions. What Type of Investor Are You
    8. 8. • The biggest mistake investors make is panic-selling during bear markets. • As an investor, you should understand that just because the benchmark market index is down, it doesn’t mean that your assets will underperform. • Even during prolonged economic slowdowns, some assets outperform and give good returns. The trick is to identify these and ride through the market lows. Facing Market Fluctuations…
    9. 9. • For this reason, it is best to buy good quality stocks of financially healthy companies. • This requires a great deal of research before investing in any asset. If you are confident about your investment, you sail through market lows more easily. Purchasing The Right Stocks
    10. 10. Rupee-Cost Averaging • Sometimes, it is also a good idea to buy when the market falls. This is called rupee-cost averaging. • For example, you bought a stock for Rs 1000. Soon after, the share price fell to Rs 800.Buying another stock at this rate would bring down the average per-share cost of your investment to Rs 900. This way, if the share price goes up to Rs 2000 in one year’s time, the amount of profit you earn is Rs 1100, and not Rs 1000.
    11. 11. Happy Investing
    12. 12. Read More Website FacebookTwitter Thank You
    13. 13. Disclaimer: Kotak Securities Limited, Registered Address: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E) Mumbai 400 051. Correspondence Address: 6th Floor, Kotak Infinity, Building No. 21, Infinity Park, Off Western Express Highway, General AK Vaidya Marg, Malad (East), Mumbai 400097. Tel no: 66056825. SEBI Registration Numbers: NSE INB/INF/INE 230808130, BSE INB 010808153 / INF 011133230, OTC INB 200808136, MCX-SX INE 260808130/ INB 260808135/INF 260808135 , NSDL IN-DP- NSDL-23-97, CDSL IN-DP-CDSL-158-2001, AMFI ARN 0164. Compliance Officer - Mr. Sandeep Chordia. Tel. No: 022 6605 6825. Email id: ks.compliance@kotak.com. In case you require any clarification or have any concern, kindly write to us at below email ids: • For Trading Account related queries: service.securities@kotak.com • For Demat Account related queries: ks.demat@kotak.com. • Alternatively, you may feel free to contact our customer service desk at our toll free numbers 18002099191 or 1800222299. You may also call at 30305757 by using your city STD code as a prefix. • In case you wish to escalate your concern / query, please write to us at ks.escalation@kotak.com and if you feel you are still unheard, write to our customer service HOD at ks.servicehead@kotak.com.