Assessing Risk

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Using "the Greeks" to Measure Risks with Options

Options require you to pick up a bit of the Greek language, which is okay, because you need to learn only four words: delta, gamma, theta, and vega. The Greeks, [more…]

Trading in Futures and Options: Understand the Risk

Futures traders are, by nature, risk takers. And options are an integral part of the trading game that futures traders play, although it is worth noting that options and futures are viable stand-alone [more…]

Questions to Ask before Trading Futures and Options

Before becoming a futures and options trader, you need to know what you're getting into — and what you may get out of the risk-taking experience. Look to this checklist for key questions that can help [more…]

Futures Markets Tricky Trading for Personal Investing

In the futures markets, individuals, institutions, and sometimes governments transact with each other for price hedging and speculating purposes. Although commercial users are the main players in the futures [more…]

Risks with Investing in Commodities

Investing is all about managing the risk involved in generating returns. Here are some common risks you face when investing in commodities and some small steps you can take to minimize these risks. [more…]

The Role of Commodity Exchanges in Investment Trading

Commodity exchanges provide investors and traders with the opportunity to invest in commodities by trading futures contracts, options on futures, and other derivative products. By their very nature, these [more…]

Investing in Natural Gas Futures on Commodity Exchanges

The most direct method of investing in natural gas is by trading futures contracts on one of the designated commodities exchanges. On the New York Mercantile Exchange [more…]

Hedge Fund Fees to Expect with Your Investment

Hedge funds are expensive, for a variety of reasons. If a fund manager figures out a way to get an increased return for a given level of risk, he deserves to be paid for the value he creates. [more…]

How to Calculate Net Asset Value of a Hedge Fund

Hedge funds are priced on their net asset value. Also called book value, net asset value is the total of all the fund’s assets minus all the fund’s liabilities. [more…]

What Is Your Tolerance for Investment Risk?

When you think of risk in your investment portfolio, you may think of volatility (how much your investments go up and down). Most people do. However, risk is more accurately defined as the probability [more…]

Examining Your Investment Allocation

Your tolerance for investment risk is an important factor in deciding where you want to put your investment dollars, otherwise known as your portfolio allocation. [more…]

How to Diversify Your Portfolio to Reduce Your Financial Risk

Reducing portfolio risk is often one of an investor’s greatest concerns. Diversifying your assets allows you to reduce your investment risk while often providing a higher return. Diversification means [more…]

How to Figure Your Probability of Ruin from Day Trading

Expected return, the happy number, has a not-so-happy counterpart called the probability of ruin. As long as there is some probability of loss, no matter how small, there is some probability that you can [more…]

How to Avoid Becoming a Personal Investing Victim

The Bernie Madoff scandal was a devastating experience for thousands of investors who had placed their trust and money with his firm and lost it all. Madoff's Ponzi scheme also created a crisis of confidence [more…]

Investing Risk-Management Tools

Risk is necessary for investment success and knowing how to manage risk when investing precious metals is something that you can profit from. Try these proven strategies when investing: [more…]

Managing Risk when Investing in Precious Metals

All types of investing involve risk, including precious metals. This chart shows some of the major choices you have for investing in precious metals based on risk: [more…]

Evaluating Your Financial Risk Profile during Economic Uncertainty

Have realistic expectations of market behavior during an uncertain economy so you're ready to implement an appropriate investment strategy. Consider three perspectives that together make up your financial [more…]

ETFs and Risk: Use Limited Correlation to Reduce Portfolio Risk

In order to put together an ETF portfolio that maximizes your return while minimizing the risk, it is helpful to understand the concept of limited or low correlation. [more…]

Market Flash Crash: How to Safeguard Your ETFs

On May 6, 2010, the stock market went kablooey. With no real reason to explain it, the stock market suddenly plunged. Some exchange-traded funds (ETFs) had fallen in value to mere pennies on the dollar [more…]

How Risky Are ETFs?

Asking how risky, or how lucrative, ETFs are is like trying to judge a soup knowing nothing about the soup itself, only that it is served in a blue china bowl. The bowl — or the ETF — doesn’t create the [more…]

Exchange Traded Funds: Systemic and Nonsystemic Risk

In the case of indexed ETFs and mutual funds, safety is provided (to a limited degree only!) by diversification in that they represent ownership in many different securities. Owning many stocks, rather [more…]

ETFs and Risk Measurement: Standard Deviation

Standard deviation shows the degree to which a stock/bond/mutual fund/ETF’s actual returns vary from its average returns over a certain time period.

For example, imagine two hypothetical ETFs and their [more…]

ETFs and Risk Measurement: Beta Assesses Price Swings Relative to Market

Beta is a relative measure of volatility for your ETF investment. It is used to measure the volatility of something in relation to something else. Most commonly that “something else” is the S&P 500. Very [more…]

ETFs and Risk Measurement: Sharpe, Treynor, and Sortino Ratios

The Sharpe, Treynor, and Sortino ratios are measures of what you get for the risk in any given ETF investment or any other type of investment, for that matter. [more…]

ETFs and Risk Measurement: Modern Portfolio Theory

How well any specific ETF fits into a portfolio — and to what degree it affects the risk of a portfolio — depends on what else is in the portfolio. This concept is called [more…]


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