Management Essay Example | Topics and Well Written Essays - 2000 words - 4

Management - Essay Example The basic idea that runs in our mind when we mention personal investment is about the risks and returns, but in reality we ask ourselves are this really the main concerns we ought to look at? In order to understand well this question I undertook a comprehensive look into the factors that affect personal investment in the UK., Personal investment To begin with, we need to understand what personal investment entails. Personal investing is one of the important components that one needs to understand while undertaking personal finance. Personal investment and personal finance are two terms that in many occasions are used interchangeably. However, it is worth noting that as much as one could use them to mean the same thing, in reality they have a slight difference. Personal finance is the broader term that describes the process of effective organization or management of assets that are in the possession of the family or an individual (Tatum, 2006). Therefore, the basic definition for pers onal investment will be a component of personal finance that involves taking investment activities such as undertaking a secure financial cushion that will cater for later years. One can also put it as, a long-term personal commitment that involves inherent risks and accrues regular income or leads to capital growth (Hargreaves Lansdown, 2009). The relationship between risk and return The key question in this symposium is whether personal investment only revolves around risks and returns. From my own opinion, I will agree with the question. The main reason we would be all want to carryout personal investment is for the returns, which determine how our future will turn out (My Wealth Guide, 2008). On the other hand, we cannot talk about returns and leave out risks because the two go hand in hand. Therefore, to be able to answer this question comprehensively we first need to understand what the relationship between risk and returns. This is because, for anyone who wishes to put his mo ney in an investment, the primary concept they need to understand is the relationship between the risks involved and the returns of the investment. It is worth noting that, in investment, the basic trick that an investor has to be aware of is that the more risk an investment has, the higher the chances of having a better return (TD Direct Investing Ltd., 2010). Therefore, before taking the risk one should have an idea of which risks as an individual one would be willing to take in order to generate more returns with the hope that the risk does not occur. This is why in order to formulate a good investment plan; you will need to asses each available risk that you are willing to undertake. There are many risks in the field of investment and when we look at each risk in detail can take a very long time. However, I have compiled a few of the major risks that tend to affect personal investment in the UK that are as following. We have the: Inflationary risk One think we can all agree on i s that the past few years have not been some of the best for UK and the world in terms of the economy. Moreover, this is where the inflationary risk comes in to play. The risk means that the value of an asset becomes lesser as inflation reduces the value of the country’s currency. Liquidity risk It refers to the risk that you as an investor may encounter when you have a need for liquid assets but are unable to sell or buy an investment because of the