Associate Professor of the Graduate School of Management of St. Petersburg State University (GSOM SPbSU) Vitaly L. Okulov, Candidate of Physical and Mathematical Sciences, in an article for the website of the practical online magazine "Business World" spoke about the theory of risk management and proposed tests to check the personal level of stress resistance and choosing a suitable investment strategy.
In the article, the expert spoke about the connection between investing and people's tendency for risk: the higher it is, the more risky transactions an investor can take, and the higher the profit and risk premium he can hypothetically receive. The risk premium in the financial market is a reward for a scarce resource (money) that an investor provides to the entire society. It is rarely paid "before the game", but, according to the author of the article, it can be paid in the future in the form of a higher possible income compared to the possible loss.
“It is important to emphasize that no matter how you invest your money, it will be fantastically dispersed throughout the global economy and will participate in the creation of a variety of goods and services. The society will pay for these goods and services in the future, and a part of these payments will return to the investor in the form of a reward. Of course, sometimes the reward turns out to be significant, sometimes it turns into a loss. But on average, over a long period, the reward will be a risk-free income plus a risk premium, and all investors receive this premium,” said Vitaly Okulov.
The full article can be read here >> (available in Russian only)