Is it Risk or Is it Superinvestor
* Is it Risk or Is it Superinvestor?
These resources will help you to complete this discussion:
* Buffett, W. (1984, May 17). The superinvestors of Graham-and-Doddsville. Retrieved from https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors
* How Warren Buffett thinks about risk [Blog post]. (2016, March 9). Newstex Global Business Blogs.
* Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2018). Corporate finance: Core principles and applications (5th ed.). New York, NY: McGraw-Hill.
* These chapters advance the concept of risk by relating it to return. The concepts of risk and return are directly correlated. They affect investment and capital project selection and are incorporated in corporation and investment value.
* Chapter 10, “Risk and Return: Lessons from Market History,” pages 287–315.
* Chapter 11, “Return and Risk: The Capital Asset Pricing Model (CAPM),” pages 316–355.
* Risk management is used by all investors and corporations. This discussion will help you understand how world-class investors manage risk. These risk management concepts will be employed in the Unit 10 assignment, Financial Engineering to Enhance Shareholder Value. To gain a full understanding of the impact of risk on the success or failure of capital projects, you should strive to see the different views of risk and that all should be considered.
Warren Buffett is the most successful investor in our lifetime, and he employs capital budgeting tools and risk assessments before he decides to invest. After reading the two articles on Buffett, how would you assume Warren Buffett employs capital budgeting and risk management in selecting which companies to buy? How do his ideas on risk differ from academic metrics and concepts of risk? Which are more reasonable? Why is the academic definition of risk different from the definition of risk by “superinvestors” like Buffett, Munger, and Graham?
Read the posts submitted by your fellow learners, and prepare a response to at least two other learners. You may use these ideas to craft substantive response posts:
* Raise additional points not considered, and explain the relevance.
* Identify gaps you noticed in the logic or argument.
* Suggest other ways of thinking about or uses for the ideas or information.
* Connect ideas to your own experiences and observations to elaborate on the main ideas.
* Come up with your own way to “dig deeper” into the posts.
* Whether in academia or in a professional setting, you should strive to support your thoughts and ideas with current research and cite your sources using APA style.
This activity will help you achieve the following learning components:
* Examine multiple potential strategies and the impacts on the financials of the firm.
* Apply ratio analysis to proposed recommendations.
* Provide a report that is a concise examination of the potential strategies with a rigorous justification.
* Select a firm and examine the various strategies to employ cash; make a recommendation to potentially increase shareholder value; justify the recommendation based on revised financial ratio analysis and research that illustrates similar situations.
* Discussion Participation Scoring Guide.
* Toggle Drawer
* [u07d2] Unit 7 Discussion 2
* To Diversify or Not Diversify
There are many types of risk: market risk, business risk, financial risk, interest rate risk, reinvestment risk, and unsystematic risk. Some can be eliminated, some can be reduced, and some have to be tolerated. Companies and investors seek to reduce risk and eliminate risk, so when they have to tolerate risk they can be aware of the risks and monitor them.
You should not only be aware of risk but know how to mute its effects. This discussion allows you to identify risks and see what can be done to mute them.
Diversification is a known portfolio risk reduction technique. Some big investors use this technique and some do not believe in diversification.
For this discussion, suppose you are a financial advisor who desires to reduce portfolio risk for your client. Prepare a brief memo to your client that advises him or her on the action you believe would reduce the risk; in other words, should your client diversify or not diversify?
In your memo, indicate the option you want your client to take, and then explain why this option is the best one. Make sure you support your reasons with examples, readings, and other relevant information.
Lastly, it is important to assess your own risk. When you think about your career portfolio, what is the level of risk in:
* Your career vision – Can you articulate your desired career goal/outcome/going?
* Your resume – Is it up to date, well written, and customized to your target role?
* Your LinkedIn profile – Is it complete, up-to-date? Are you engaging with others on LinkedIn?
* Your interview skills – Are you prepared to showcase your knowledge, skills, and abilities for your next job or communicating within your existing role to advance your career?
* Your network – Who are you connected with who will help you get to the next job you want, inside and/or outside your existing organization?