Is Investment a Matter of Evaluating Risk or Simply Luck Essay

Is Investment a Matter of Evaluating Risk or Simply Luck - Essay Example Most goals in personal investment are straightforward, in that individuals may be preserving their assets, saving for his or her retirement, funding his or her pension plan, or he or she is meeting a university spending requirement (Finke & Huston, 2003). Harrison et al., (2009), Bajtelsmit and Bernasek (2007), and Finke and Huston (2003) emphasize that personal investment constraints can be simple or complex depending on the individual and the current investment situation. The primary constraint which, individual experiences the tolerance level that an individual has the market risk. Potential return and the market risks are related, in that the desire of an individual to experience a greater return will need his or her exposure to higher market risks (Papke, 2008). In most investment cases, the time horizon is another fundamental constraint. A good example is a university endowment that has an infinite horizon has risks which are unwise for an investor who is looking to invest in his or her child’s education (Duflo & Saez, 2009). Other investment constraints include liquidity requirements, exposure to taxes, legal issues, and other factors such as avoiding some investments. Constraints on personal investments change with time and an individual must carefully study and research on these constraints before deciding on investing in any investment plan. The review provides a discussion of the technical analysis concepts. It reviews on the module showing how it works, depicting two advantages and two disadvantages. The literature reviews on the fundamental analysis, showing how the module works. The research shows two advantages and disadvantages of the analysis. Part two of the research entails the working of the random walk theory, showing and explains how it works.