Risks and Returns
How much risk should you take? It’s important to ask yourself this question when it comes to investments. Our everyday activities involve the “risk and return” tradeoff and the more you learn about it, the better you will be able to manage your investment opportunities.
Check out how the tradeoff works:
- The greater the uncertainty (which means higher risk), the higher the potential returns may be but then again, higher losses can be incurred also.
- The lower the uncertainty (which means lower risk), the lower the potential returns may be but the potential losses are less.
- Low risk means lower financial returns but greater safety.
- High risk means greater financial returns but lower safety.
Note : you shouldn’t forget that taking more risk will not ensure a greater return, it only implies that there is an increase in the possibility of obtaining a greater return.
By learning about it, you will be able to better manage your investment options and associated risks based on your personal risk profile. Those with higher savings can take more risk; but a good rule of thumb is to invest in higher risks investments only the money you can afford to lose.
Learn more about risk and return: ABCs of Investing- Risk and Return
Personal Financial Tips
- Pay your bills on time.
- Eat more at home and less out.
- Take your food to work.
- Forgo the ice cream store and pop popcorn at home.
