ShmoopTube

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Finance a la shmoop how are risk and reward related? or

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interrelated okay so here's an illustration of risk you're in a golf [golfball near a golf hole]

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tournament on the first tee of a hole with a narrow fairway if you take just a

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half swing your ball won't go very far but you also likely won't end up here [golfer gives a half swing and ball goes towards the hole]

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it'll almost certainly fit nicely in the fairway and it's likely you'll need

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three or four half swing strokes to reach the green if you're cool with [golfer taking multiple shots and reaches the green]

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shooting 28 over par or a hundred today well then maybe these half

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swings are your ticket to happiness sometimes a score of a hundred wins the [golfer stood beside a scoreboard with a score of 100]

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purple turkey that is you are taking less risk and are totally fine being

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rewarded less all right now meet Corey Mcilshmoop he wants the big score

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lots of strokes under par and he's willing to risk a lot to get there. His [Corey Mcilshmoop swinging a golf club]

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ball either goes 340 yards and lands on the green setting him up for an eagle

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putt it goes out of bounds with a vengeance there, ouch.. all right well on

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the investing golf course like this one generally speaking riskier investments [golf course made into an investment course]

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are things that don't have a long track record of success like compare the

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coca-cola company with a new IPO of whatever.com what are the odds that in [a comparison of coca cola vs. whatever.com]

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five years people are still drinking sugared fizzy water well pretty good

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right now how about the odds of a billion people still being enamored of [myspace and whatever.com with number of people liking the website rising]

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whatever com yeah much less clear like less clear than crystal pepsi.. Risky can

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also mean private investments in two kids plugging away inside of a garage [Kids working on a project in a garage on laptops]

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and yeah they could be Larry and Sergey making Google but more likely they could

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be buzz and billy-bob making a whoopee cushion that pushes the bounds of

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realism yeah..risky can also be just a company that doesn't pay a dividend if a

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company does pay a divy, you at least get the dividend back each year as you slowly get your

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initial investment returned to you you can make money even if the stock price [company's share price, dividend and yield]

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doesn't go up in the case where stock pays no dividend your instead betting [person puts chips onto a roulette table]

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everything that the company will just grow but growth companies with no

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dividend while that's all well and good think things

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like Facebook and Amazon and uber but if the company doesn't grow well then bad [whatever.com falling on the floor]

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things happen you've got no dividend and the share prices declined and so the

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basic idea is that the more risk you take the more reward you can have in the [man playing golf and eagle swoops and picks up ball]

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same lack of reward you can have as well and every now and then you get one of

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the three hundred forty yard drive to go in the hole which makes the risk totally [money falling next to a building of baby's first chainsaw]

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worth it yeah because well you're never going to sit around telling your

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grandkids about the time you shanked your drive 15 yards [grandad telling children a story about golf]

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