Question

When investing, one needs to understand that investments have common characteristics including

1. existence of secondary markets

2. risk

3. potential for capital gains

a. 1 and 2

b. 1 and 3

c. 2 and 3

d. all the above

Answer 1

An investor needs to understand all of the above to better estimate the risk reward profile of the investment. He should have some decent understanding of secondary markets( where stocks trade) since he needs to operate in it. He should understand various types of risk(systematic and unsystematic risk) to estimate risk of his investment. He should also understand the potential for capital gains to understand the ability of incurring profits when doing transactions( buying or selling)