As you move forward in your academic and professional career, you will need to consider the contents of your asset portfolio. This will be no small task given today’s environment of rapid fluctuations and uncertainty.
Professor of Finance, Dean Johnson, offers the following insights on dealing with risky situations in the marketplace.
From Dr. Dean Johnson,
“With the uncertainty of potential default by European nations, the world-wide financial markets have shown significant volatility with markets diving and rallying on an almost daily basis. Unfortunately, the dives have outnumbered the rallies.
For the new investor, these events provide a reality check on your risk tolerance. While risky assets provide the opportunity for higher expected returns, your actual realized return can be substantially more or less. If you cannot “stomach” the losses, have panicked and sold your assets, or are losing sleep over your investments, these are signs that you cannot tolerate your portfolio’s risk level. Indeed, the higher expected return of risky assets is the expected reward for those who can tolerate market events, like the European debt crisis.”