Assessing Risk
Lesson summary:
In this lesson, the speaker explains that the risk investors should focus on when investing in a business is the chance of permanent loss of their investment. They suggest comparing the risks of different investments to government bonds, which are considered the lowest form of investment. While lending money to the government may earn a safe 3% return, investing in a start-up business may provide a higher rate of return but also has a higher risk of failure. Equity investors expect a higher return for higher risk businesses and have the potential to receive dividends over the life of a company.
