Investor Glossary-downside riskInvestor Glossary-downside riskInvestor Glossary-downside riskInvestor Glossary-downside riskInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Downside Risk

The HTML to link to this page
 

Downside risk includes both the likelihood and extent to which a stock's price may decline. Analysts use various measures to assess the downside risk of a stock. For example, stocks that are selling at the low end of their historical price-earnings ratio would appear to have relatively limited downside risk, because investors will perceive the stock as offering good long-term value. Also, stocks whose dividend yield is both high and safe would also have seemingly little downside risk, because investors should continue to buy the stock at that price for the cash return. On the other hand, stocks with historically high P/Es may have relatively high downside risk, because they may appear overvalued. For conservative investors, limited downside risk may be key. But for investors who seek to maximize their returns, limited downside risk is just one factor to be considered in buying an equity. While limited downside risk is a positive, it comes at a price: Not surprisingly, it is often those stocks that have the least downside risk that also have the least potential for price appreciation.



Rate this downside risk definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: inflation, stock split, required rate of return, 144a, option premium, VIX, class C shares, implied volatility, diluted share, average price per share, APR, risk management, deferred revenue, LIBOR, limit order, deferred tax, real GDP, ex-dividend, current ratio, annual return, minority interest, 1031 exchange, stock market close, FICO score, labor relations, per diem, retained earnings, quality assurance, ex-dividend date, FTSE, debt service coverage, liquidity ratio, 401a, command economy, dividends payable, Key Rate Duration, Zero Cost Collar, irrevocable trust, balance sheet, reverse mortgage, open position, 1035 exchange, phantom income, covered put, cancelled check, in escrow, EBITDA, wholly-owned subsidiary, margin rate


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use