Risks and the Stock Markets - Part 4 of 7

Over the last 3 parts, I have touched upon the following:
• Perception of ‘Risk’ as the measure of ‘gain’
• Money can never be completely safe – its ‘purchasing power’ diminishes
• Zero ‘Risk’ is Zero ‘Gain’
• Governments don’t have the mandate to keep your money ‘safe’ and keep it ‘growing’
• Saving is not investing

Let’s now identify the degree of risk aversion one is comfortable with:
If one had Rs. 100/- and there was an opportunity to generate a profit or loss scenario as below, which one would you chose:
o Option A - Max profit of Rs. 10/- and max loss of Rs. 10/-
o Option B - Max profit of Rs. 20/- and max loss of Rs. 10/-
o Option C - Max profit of Rs. 50/- and max loss of Rs. 50/-
o Option D - Max profit of Rs. 100/- and max loss of Rs. 100/-
o Option E - Max profit of Rs. 200/- and max loss of Rs. 100/-

In the above illustration, inflation is considered as money value destroyer. Hence, profit and loss scenario can occur at the same time.