Whenever you consider a potential investment, there?s always a considerable focus placed on achieving the desirable risk-reward ratio.
More specifically, people tend to tailor their investment choices and portfolio to suit their unique philosophy, whether they?re risk-averse or have an appetite for volatile markets that have the potential to deliver an exceptional return.
While this should inform the choices that you make, however, it?s important to remember that risk aversion should be considered as an investment strategy. The same can be said for those who prefer higher-risk investments, as the way in which you manage risk and strive to optimise your returns is far more important.
The Importance of Risk-reward and Determinism
Successful traders have a tendency to be deterministic in their outlook, as they focus on the underlying laws that govern change in the marketplace and the individual elements of their investments that can be controlled. This is where the preoccupation with risk comes from, as investors must prioritise markets that suit their outlook and are capable of delivering a viable and realistic return. By making considered investment choices, it?s possible to achieve a desirable balance between risk and reward and achieve greater control over capital deployment.
By themselves, however, the careful selection of markets and assets in relation to risk and reward cannot be considered as standalone strategies. Instead, they represent the foundation of a viable st...