Are you risk averse or risk taker?

Suppose you have been given an option to select between two "doors of opportunity" to gain money. One door (let's name it Door A)leads you in by providing you a guaranteed RM 5000 cash and the other door (let's call it Door B) leads you in to give a 50-50 chance of gaining RM10000 cash. Sincerely, which door would you prefer to choose?

I guess you would probably choose to enter Door A as it guarantees you of a RM5000 cash, in relation to Door B. Although by entering Door B, you might enrich your self with a whopping RM10000, your dominant side of "risk-averse" brain adamantly put you in perspective of that of a loser!! A message triggered by this "risk-averse" behaviour of the mind, prompts you from making unprecedented decision or in another way of describing is, allowing you to tightly safeguard you from losing. Please do not judge me wrong. I am not implying that you are wrong! You are among millions of people who would have shown the same feedback.

Surprisingly, there are enormous number of people who would have reacted oppositely, i.e. chosen to enter Door B, instead. The description well suit their behaviour is like the one akin to "Risk-taker". They go one step ahead in accepting the risk as it is only 1 half of the probability and not any lesser than that. This "risk-taking" attitude is very prevalent among investors who holds high risk investment grade products.

There is one matter that you should know is, if you are expecting any high return in your investment, you should also must be ready to embrace a highly risky investment products. The phrase "THE HIGHER THE RISK, THE HIGHER THE RETURN WILL BE" still holds water. You can't have the cake and eat it yourself! Many investors around the world makes hugh profits through investing in high risk financial/investment products.

Having said that, should your appetite for risk is low, you should prevent from investing in a highly exposed risk products. Above, a chart is displayed to show you some investment products that ties its inherent risk. Please note that as the line moves up, the risk crawls up too and the potential upward returns are positive.

Happy Investing :)