Good evening all and welcome to this episode. Under this topic we shall be looking at two important topics:
Investment risk versus risk appetite.

An investment bb is an item or asset acquired with the aim of generating income or growth in value. It is also the commitment of money or fund for a period of time in order to derive future benefits that will compensate the investor for the following:

1. the time, the money or fund that is committed
2. the expected rate of inflation and
3. the uncertainty of the future payments arising from the investment

Investment Risk
Investment risk is the possibility of occurrence of losses in relation to the anticipated return on any particular investment. It is the possibility of losing some or all of the money invested.

Investment Risk can be classified into three subheading:
a. High risk investment
*The potential gainof a high risk investment is that there are chances that one could make a very high return on the investment, but there are strong chances that you could also lose a greater amount of your investment hence your principle amount can be eroded eg shares options, future managed funds in shares

b. Medium risk investment
* These have the potential for steady income and the principal investment may not be eroded. This type of investment includes commercial building, buying and selling etc. The income from it, however, may not be as high as the first category

c. Low risk investment
* This type of investment has the potential for steady income but low and with low risk.
* The risk associated with this class of investment is very low, so your investment is relatively safe.
* This includes interest paying accounts eg saving account, term deposit, bonds etc

Meanwhile, when I will unfold the practical business investment this month, it will be a risk free investment where those who will take action from the opportunity will be making a huge heavy profit from it even while you are sleeping.
I promise you guys some will laugh and celebrate. Let move on to risk appetite.

Risk Appetite
Risk appetite is one's willingness to take an account of risk in pursuit of profit. An investor with a high appetite for risk will focus majority on the gain and is willing to accept any possibility of loss.

Similarly, if you are a low risk appetite investor, your focus only should be on the preservation of your capital.

Risk capacity is your ability to take in losses without endangering your financial goals.

An investor may have the risk capacity but is a low risk appetite (risk averse) person while another may have a high risk appetite but does not have sufficient capacity to take the risk

Note that, in order to reduce any risk from investment, there must be need for diversification.

Diversification
This is the art of spreading your investment across different asset classes to minimize your risk

The percentage of investment into each asset class is determined by the age of the investor

The higher your age, the higher your investment into lesser risk asserts and vice versa.