This week, let's talk about investments andinvestment risk. In class with you today are individuals with various experience in investing - some may be seasoned professionals, while others may have very little experience. Either case is perfect okay because we all approach investing, risk, and return differently.

When you invest your money, you have to consider a basic risk-return tradeoff. The risk-return tradeoff is the balance between the desire for the lowest possible risk and the highest possible returns. In general, low levels of uncertainty (low risk) are associated with low potential returns and high levels of uncertainty (high risk) are associated with high potential returns (link).

1. Describe three factors that influence your evaluation of the risk of an investment
2. What factors influence risk tolerance?
3. How does diversification positively and negatively affect risk?
4. What type of investor would invest in a high beta stock and a low beta stock?