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Rupesh Roshan Singh, Lovely Professional University
Unit 3: Managing Investment Risks
Unit 3: Managing Investment Risks Notes
CONTENTS
Objectives
Introduction
3.1 Meaning and Definitions of Risk
3.2 Types of Investment Risk
3.3 Pure Risk
3.3.1 Types of Pure Risks
3.4 Measurement of Risk
3.5 Methods of Handling Risk
3.5.1 Avoidance
3.5.2 Loss Control
3.5.3 Retention
3.5.4 Non-insurance Transfers
3.5.5 Insurance
3.6 Assessing Risk
3.7 Investing to Minimize Risk
3.7.1 Using Asset Allocation
3.7.2 Using Diversification
3.8 Modern Portfolio Theory
3.9 Summary
3.10 Keywords
3.11 Review Questions
3.12 Further Readings
Objectives
After studying this unit, you will be able to:
Identify the various types of risks;
Understand the method of measuring and handling risks;
Learn about the management of risks;
Discuss the use and importance of financial statements in financial planning.
Introduction
The whole gamut of financial decision making centers around the trade-off between risk and
return. Decision making of any kind involves both positive and negative aspects. A Farmer tills
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