NextPrevious

Saving, Managing Debt, and Budgeting

Risk / Reward

What are some limiting factors in using risk/reward ratios?

Most experts agree that use of risk/reward ratios is limited, as they do not take into consideration the probability of attaining a certain target or goal, or the probability of a certain downside risk. But through careful research, you may see the potential high and low. The model also does not take into consideration time or the occurrence of a macroeconomic event that may, in the short term, radically change the price of your investment, thus affecting our reward. So use risk/reward ratios as only one tool when making investment selections.



Close

This is a web preview of the "The Handy Investing Answer Book" app. Many features only work on your mobile device. If you like what you see, we hope you will consider buying. Get the App