Page 16 - DBP5043

CONCEPT OF RETURN

All investors want a return or profit from each of their investments
without having to experience high risk. However, the returns and risks
are directly related to each other where a higher risk is associated with
a higher return that will be obtained and vice versa.

Consideration should be taken into account in determining the risks and
returns of an investment. This topic will emphasize the risks and returns
for investors that invest in common stock markets.

Types of investors:

Generally, investors can be divided into three types:

1. Risk free:

This type of investor, try to avoid investing in high-risk investments such
as investments in stocks. They are more interested in investing in the
investment that has a very low risk, such as Amanah Saham Bumiputera
(ASB), Premium Savings Certificates, or any investment guaranteed by
the government.

2. Risk adverse:

These types of investors will try to avoid investing in a risky market, but
tend to prefer low-risk investments even lower returns. They are always
careful to environmental conditions that affect the stock market.

3. Risk Taker:

These types of investors like to invest in high-risk market, they think the
higher the risk of an investment, the higher the potential returns
available. Investors do not have the constraints of funds to invest.

Reducing risk by diversifying

Diversification mean to spread an investment over a range of investment
instruments in order to minimize the risk of losing all the investment
should one investment go bad. Diversification would tend to reduce or
eliminate risk