he selection of assets that comprise a portfolio of investments should always be determined by the risk tolerance of the investor.
When it comes to investing the degree of return is usually relative to the level of risk taken i.e. the higher the return the higher the risk. There are over 50 different types of risk and whilst all have an impact on investing there are some that have a more significant impact on investments than others, with some forms of risk occurring in-frequently and with others potentially causing a paradigm shift affecting not only investments but the environment, quality of life, politics and virtually anything one can think of.
In this case, we look at investing and define risk where the outcome differs with the potential return seen as being higher returns relative to past performance and the possibility of a partial or full loss likely to occur. Managing risk starts by understanding what type of risk is involved and how it is determined. Once this is realized it is possible to avoid or manage the risk involved.
number of years it would take to double the value of an investment or alternatively provide a calculated rate of return to achieve a doubling in the value of an investment. The Rule of 72 is best calculated with yields between 6% and 10% and for every 3 percentage points change above or below 8% you add or subtract another point to/from the rule and in this case, this would lead you to The Rule of 73 with 6 percentage points leading to The Rule of 74 and below to The Rule of 70 and 69. Though the Rule of 69 is calculated by dividing 69 by the return plus 0.35.
