The Risk and Rewards in Investing.

The Risk and Rewards in Investing.

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There are two types of risk and rewards in investing, these being the risk and reward in business investment. In business investment the risk is that your capital will not be fully recovered when you sell or buy something off the market. Your reward is that your capital will be fully recovered plus your interest and profit from your sale. The risk is that your capital may be lost or damaged. If your capital is fully recovered then the risk is that you may lose all of your capital if you do not properly manage your risk capital.

So you can see that there are risk, and reward in all types of businesses but the type which are more closely related to business risk is that in the stock market. There is a reward when you buy and sell certain shares of stock but you also have a risk in that the price you pay for the stock may drop lower than what you paid for it may gain too much and go up. The risk involved is that if you purchase too many shares then the company might fail and you may lose everything that you invested in it. If the price drops too far then you can lose everything that you bought as well. Of course if you are lucky and the price stays relatively stable then you will make a profit if you are correct about the direction the stock will take.

If you were unsure whether the business was going to be successful or not you would want to know what kind of reward you will get if you were right. If you were right and the business becomes successful then the reward for you will be enormous, if not you will only be disappointed. It is all about reward and risk capital in every type of business. You need to calculate if the risk is worth taking and if the reward is greater than the risk then you will need to balance out your risk capital with a reward capital so you can make a profit.

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