How to set the right Risk Appetite in Smallcase
Risk appetite and risk tolerance are one of the most important criteria in selecting investments. Let’s look at how to match them in Smallcases. One thing has become certain in the market situations over time- there is no such thing as a “free lunch.” Returns on your investments, like anything else, have a cost. To achieve large gains, you must be able to tolerate severe volatility. In other words, a high rate of return on your investment is a reward for taking on a high level of risk. This is referred to as the risk-reward trade-off. What is Risk Appetite? People frequently invest in products offered by relationship managers and investment agents strictly on the grounds of the rate of return. However, there are other important indicators that investors tend to overlook at this stage. Risk is one of the essential considerations of all. Before purchasing a smartphone, we give it a lot of thought. We look at the features, performance, and, of course, the pricing. We would never buy phones costing Rs 50,000 even if we were merely price sensitive. We want to create a balance between the utility they (smartphones) provide and their cost. Similarly, the risk is a significant consideration in investments, along with return potential. Almost all investment products are subject to some level of risk; only the degree of