A Bird in Hand Is Worth Two in the Bush

Low risk suggested by the Greek proverb

вЂ"вЂ"A bird in hand is worth two in the bush

As the saying goes “A bird in the hand is worth two in the bush”, which is popularly applied to variety of daily life, because it warns us about the effects of greed, we can conclude from it that risk control can be an important element of investment.

As follows, we will discuss how to manage the low risk in the investment.

1. Low risk in amount of capital

2. Low risk in time span of investment

3. Low risk in investment item

4. Others

Let’s get going!

Here are the details to talk about.

Firstly, people do not want to take risk, especially when the amount of capital is large. For example, when a person has only 2 dollars to invest, he would be likely to buy a lottery, which has a very low probability of getting income that means a high risk of investment. While if he has 200 millions, he would be more careful so that he might take a less risky investment item. So we can get to the conclusion that the risk of investment and the amount of capital may have a negative relationship.

Secondly, let’s imagine: if we pitch a coin, we will get a head side or tail side. As the number of times we pitch increases, the result will become closer to half-to-half chance of either side, which indicates that as the time goes, there’s a tend that uncertainty of an event will goes down, that is to say low risk comes into existence.

Connecting what we have mentioned above, we have a short summary that is following.

Alternative 3 would have the lowest risk. In general, the investment involved large amount of capital with long time span would be less risky for investors.

Thirdly, the selection of investment item may also affect the risk of investment. Instead of investing in those high-tech or burgeoning industries, which accompanied by more uncertainty that would cause higher risk, the traditional and steady industries may be the best choice of investors because the plenteous information is a good way to reduce investment risk. This selection is also an application of the proverb by considering that well-informed industries are kind of “a bird in hand”.

Other factors that can not be ignored besides what we have covered above, such as personality, mental endure of loss, personal investment goals, the actual situation one gets into and investment environment, should also be taken into consideration.

Here we suggest a real investment case to illustrate how to reduce the investment risk.

Suppose the investor would conduct an investment with $100, the probability distribution of investment income from stock A and B is following in the table:

Stock A Stock B

Income Probability Income Probability