Investment Activities: Safety, Returns & Risk of Loss - Research Paper

Introduction

The factors that translate an investment activity vary from person to person. Some people may mark it with safety with no possibilities of losing the initial capital, whereas others describe a good investment as one with a fabulous return. Also, there exists a group of people who want to achieve a little or both returns from the investment. However, the contemporary investment activities have developed a trend that characterizes any return on investment situation with a looming chance of losing both the capital gains along with the principal capital. Therefore, investors should be more vigilant on any investment activity because good investment opportunities always come with underlying offers that are capable of offsetting the related risks. Thus, the adage of the ancient entrepreneurs that states, "Investors are not rewarded for safety" (Scott, 2016). For instance, a bank account may stay on the extreme safe side, while the underlying interest on the money may be extremely low regarding its safety. Nevertheless, if an investor starts a new business, there exist huge risks that may fail the investment. On the other hand, the investment may garner a considerable payoff.

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Psychological Factors

The background of the study entails understanding the ability to comprehend any chance of losing the principal capital in investment activity. The study reveals that if losing the principal of investment activity can lead to certain financial hardships, then it would not be a good opportunity. In general, a good investment does not have a specific good or bad choice but only happens to be the right choice for an individual. It would be appropriate to use the beta method to show the exact amount of risk that one may speculate before deciding on an investment opportunity. Since beta is the benchmark that measures all stocks, the participant will be majorly the individual who has shares in different business units. The resulting process will reveal that every stock and mutual funds contain an aspect of beta that measures the underlying variability with a particular stock and the investment activity.

Connections of the Resources to Original Research Problem

According to Liborius and other scholars in 2019, they argue that any investment opportunity is characterized with downside risk. Therefore, the factors that determine a good investment should not necessarily entail a focus on success. Risk speculations should also be considered. On the other hand, Zaremba and Shemer (2017), argue that any beta that falls under one as margin should be marked as the safest investment opportunity while those that go above one should be regarded as riskier than other.

On the same measure, Scott (2016) reveals the underlying relationship between collaboration and a good investment. The scholar argues that streamlining the existing links is an effective step in achieving the required outcomes in an investment opportunity. Baum and Crosby (2014), on the other hand, argue that a good investment opportunity lies in the hand of the investor and the strategic tool that one applies in the implementation processes. However, Medrano et al. (2017), on their arguments about a good investment, state that any investment activity calls for solitary confinement that establishes strict measures to control any contraband activity within the business operations.

Conclusion

On balance, the factors that invest a good fit are the volume of risk that an investor can tolerate. All the investment opportunities are associated with certain risks; thus, a good investment cannot be marked with a total lack of underlying risk. Therefore, a good investment goes beyond the superficial speculations of risks and gains associated.

References

Baum, A. E., & Crosby, N. (2014). Property investment appraisal. John Wiley & Sons.Liborius, P., Bellhauser, H., & Schmitz, B. (2019). What makes a good study day? An intraindividual study on university students' time investment by means of time-series analyses. Learning and Instruction, 60, 310-321. https://www.sciencedirect.com/science/article/pii/S0959475217306254

Medrano, J. A., Ozkan, T., & Morris, R. (2017). Solitary confinement exposure and capital inmate misconduct. American Journal of Criminal Justice, 42(4), 863-882. https://link.springer.com/article/10.1007/s12103-017-9389-3

Scott, T. A. (2016). Is collaboration a good investment? Modeling the link between funds given to collaborative watershed councils and water quality. Journal of Public Administration Research and Theory, 26(4), 769-786. https://academic.oup.com/jpart/article-abstract/26/4/769/2223060

Zaremba, A., & Shemer, J. (2017). Is Good Company a Good Investment? Quality Investing. In Country Asset Allocation (pp. 105-120). Palgrave Macmillan, New York. https://link.springer.com/chapter/10.1057/978-1-137-59191-3_6