Risk and return go together. You must understand this relationship to make informed financial decisions. This applies when you make personal investment decisions or when youre investing excess cash for a business. In this journal assignment, you will explore the risk-return relationship when investing in stocks in both of these roles.
Directions
Write a journal discussing risk and return as it relates to investing in stocks.
Specifically, you must address the following rubric criteria:
Investment Risk: Explain key risks associated with investing in stocks.
Investment Return: Discuss events that can cause the price of a stock to increase or decrease.
Risk-Return Relationship: Explain the relationship between risk and return and how this relationship affects stock-investment decisions. Use examples to support your claims.
Reflection: Describe how you would make stock-investment decisions in your:
Personal life: Investing for yourself
Professional life: Investing in a business
Sample solution
Dante Alighieri played a critical role in the literature world through his poem Divine Comedy that was written in the 14th century. The poem contains Inferno, Purgatorio, and Paradiso. The Inferno is a description of the nine circles of torment that are found on the earth. It depicts the realms of the people that have gone against the spiritual values and who, instead, have chosen bestial appetite, violence, or fraud and malice. The nine circles of hell are limbo, lust, gluttony, greed and wrath. Others are heresy, violence, fraud, and treachery. The purpose of this paper is to examine the Dante’s Inferno in the perspective of its portrayal of God’s image and the justification of hell.
In this epic poem, God is portrayed as a super being guilty of multiple weaknesses including being egotistic, unjust, and hypocritical. Dante, in this poem, depicts God as being more human than divine by challenging God’s omnipotence. Additionally, the manner in which Dante describes Hell is in full contradiction to the morals of God as written in the Bible. When god arranges Hell to flatter Himself, He commits egotism, a sin that is common among human beings (Cheney, 2016). The weakness is depicted in Limbo and on the Gate of Hell where, for instance, God sends those who do not worship Him to Hell. This implies that failure to worship Him is a sin.
God is also depicted as lacking justice in His actions thus removing the godly image. The injustice is portrayed by the manner in which the sodomites and opportunists are treated. The opportunists are subjected to banner chasing in their lives after death followed by being stung by insects and maggots. They are known to having done neither good nor bad during their lifetimes and, therefore, justice could have demanded that they be granted a neutral punishment having lived a neutral life. The sodomites are also punished unfairly by God when Brunetto Lattini is condemned to hell despite being a good leader (Babor, T. F., McGovern, T., & Robaina, K. (2017). While he commited sodomy, God chooses to ignore all the other good deeds that Brunetto did.
Finally, God is also portrayed as being hypocritical in His actions, a sin that further diminishes His godliness and makes Him more human. A case in point is when God condemns the sin of egotism and goes ahead to commit it repeatedly. Proverbs 29:23 states that “arrogance will bring your downfall, but if you are humble, you will be respected.” When Slattery condemns Dante’s human state as being weak, doubtful, and limited, he is proving God’s hypocrisy because He is also human (Verdicchio, 2015). The actions of God in Hell as portrayed by Dante are inconsistent with the Biblical literature. Both Dante and God are prone to making mistakes, something common among human beings thus making God more human.
To wrap it up, Dante portrays God is more human since He commits the same sins that humans commit: egotism, hypocrisy, and injustice. Hell is justified as being a destination for victims of the mistakes committed by God. The Hell is presented as being a totally different place as compared to what is written about it in the Bible. As a result, reading through the text gives an image of God who is prone to the very mistakes common to humans thus ripping Him off His lofty status of divine and, instead, making Him a mere human. Whether or not Dante did it intentionally is subject to debate but one thing is clear in the poem: the misconstrued notion of God is revealed to future generations.
References
Babor, T. F., McGovern, T., & Robaina, K. (2017). Dante’s inferno: Seven deadly sins in scientific publishing and how to avoid them. Addiction Science: A Guide for the Perplexed, 267.
Cheney, L. D. G. (2016). Illustrations for Dante’s Inferno: A Comparative Study of Sandro Botticelli, Giovanni Stradano, and Federico Zuccaro. Cultural and Religious Studies, 4(8), 487.
Verdicchio, M. (2015). Irony and Desire in Dante’s” Inferno” 27. Italica, 285-297.
Sample Answer
Sample Answer
Exploring the Risk-Return Relationship in Stock Investments
Investment Risk
Investing in stocks entails various risks that investors should consider before making financial decisions. Some key risks associated with investing in stocks include market risk, company-specific risk, and liquidity risk. Market risk refers to the potential impact of broader market fluctuations on stock prices, influenced by economic conditions, geopolitical events, and investor sentiment. Company-specific risk, on the other hand, relates to factors specific to a particular company, such as poor financial performance, management issues, or legal challenges. Lastly, liquidity risk pertains to the ease of buying or selling stocks without significantly affecting their price, which can be challenging for thinly traded stocks.
Investment Return
The price of a stock can fluctuate due to various events and factors. Positive events that can cause the price of a stock to increase include strong quarterly earnings reports, successful product launches, strategic acquisitions, or favorable regulatory changes. On the contrary, negative events like economic downturns, industry disruptions, poor financial results, or leadership scandals can lead to a decrease in stock prices.
Risk-Return Relationship
The relationship between risk and return is fundamental in stock investing. Generally, higher levels of risk are associated with the potential for higher returns, while lower-risk investments typically offer more modest returns. Investors seeking higher returns must be willing to accept greater risks, such as investing in growth stocks or emerging markets. Conversely, conservative investors may opt for lower-risk investments like blue-chip stocks or bonds, which offer more stability but lower returns.
For example, investing in a high-growth technology startup carries significant risks due to market volatility and company-specific uncertainties. However, if the company succeeds and experiences substantial growth, investors stand to gain significant returns on their investment. On the other hand, investing in a well-established utility company may offer lower returns but with lower associated risks, making it a more suitable option for conservative investors seeking stability and income.
Reflection
Personal Life: Investing for Yourself
In my personal life, I would adopt a balanced approach to stock investing by diversifying my portfolio across different sectors and asset classes to mitigate risks. I would allocate a portion of my investment to high-growth stocks with the potential for significant returns while also including stable dividend-paying stocks to provide consistent income. Regularly monitoring market trends, staying informed about company performance, and reassessing my investment strategy based on changing market conditions would be crucial in making informed stock-investment decisions.
Professional Life: Investing in a Business
When investing excess cash for a business, I would prioritize risk management and align investment decisions with the company’s financial goals and risk tolerance. Conducting thorough research on potential investment opportunities, analyzing industry trends, and assessing the competitive landscape would guide my decision-making process. I would seek investments that offer a balance between risk and return, considering factors such as liquidity needs, growth prospects, and overall business strategy to maximize returns while safeguarding the company’s financial stability.
In conclusion, understanding the risk-return relationship is essential for making informed stock-investment decisions both in personal and professional contexts. By weighing the risks associated with investing in stocks, evaluating potential returns based on market conditions and individual goals, and maintaining a diversified investment portfolio, investors can navigate the dynamic world of stock investing with confidence and strategic foresight.
