What is risk aversion?

If common stockholders are risk averse, how do you explain the fact that
they often invest in very risky companies?

Risk aversion – Low exposure to risk and sense of security.

Investment done in the manner of taking in consider of the risk after investment.
The risk been evaluate and with cautions of security, usually this type of investors don’t really go for
high investment and keep it low and safe.

Neutral Investor - Focus more in potential gain regardless of risk

The type of investors who really go for investment after they know the potential of what they going
to invest and the best part they don’t really think of the risk. In the event risk exist still they will
consider the gaining.

Risk investor - investing in order to earn higher returns.

Mainly concern on high return regardless of the risk might exist. Very popular among those who
really go for sense of dollar and cents irrespective of all the risk. This type of investors usually from
high end side with strong and confident background.

In terms of stock exchange, the fundamental is gambling. Investment and expect for returns of
investments, obviously dealing with dollar and cents. It may be a quicker way or trend that
happening in current situation of lifestyle for earning extra income or some may be above the
expected margin which beyond predictable. Hence on the stock exchange side said that every
investor in own option and not really equally averse in the investment. For instant: those who
pushing themselves into risky exchange usually will expect for a range of solid amount more then
what been invested. Some are in opposite track of this situation where will go for more secure and
aversion on what they investing, this is mainly to make sure that to gain back the investment in
protected mode.