Risk is composed of a two values - an intrinsic value and a time value. The intrinsic value is the amount of money that you have available to invest - the more money you have, the more risk you are able to absorb. This is a relativity concept that is motivated by being able to accept a greater level of loss when a larger monetary base is available.
For example, compare the loss of an investment of $10,000 to someone that has $1,000,000 in cash against someone that has only $50,000. Clearly, the person with more money is less affected by the loss of the investment than the person with less money. This is because the person with the higher capital base (the assets they own) is able to absorb more risk than someone with a smaller capital base and therefore have the ability to take a higher level of risk on this investment.
The time value of risk is that amount of time that you are able to keep your money invested. For instance, if you require your money in 6 months in order to fund a new business - investing in high risk securities may not be the most advisable course of action � equally, if you don't need your money for another 10 years it might be worth investing in. The riskier an investment is, the higher the volatility or price movements of the investment are. In short spans of time, these high price movements may mean losing a significant amount of your initial outlay - conversely across a long period of time these price movements may become less variable and therefore a greater investment return can be made.
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