Risk is a key component to consider when making investment decisions. Taking on too much risk can expose you to extreme volatility, while too little risk may not give you the returns you want. Find out how to determine your own comfort level for accepting risks.
When investing, it's important to consider your savings goals and personal tolerance for risk. At the end of the day, the marketplace has an investment for everyone.
Generally speaking, the more risk you are willing to take, the greater the potential for higher returns. And the opposite also holds true, the lower the risk, the lower the potential for returns.
For example, basic savings accounts and CDs are generally considered low risk investments because it is unlikely that you will lose a significant amount of your principle value. However because the risk is low, the returns are historically low as well.
Stocks on the other hand, are considered higher risk options because the value of your investment may fluctuate more frequently and at more dramatic levels. But when you take on this increased risk, you also have a higher potential for making more money on your investment.
At the end of the day, the marketplace has an investment for everyone. Consider your particular comfort levels as you take the time to find the right balance of risk and potential rewards for your investments.
Principal value and investment returns will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. A periodic investment plan does not assure a profit or protect against loss in declining markets. Please read a mutual fund’s prospectus carefully before investing.
This information in the Financial Tips section is provided for educational purposes only and is not tax, legal, financial planning or investment advice. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.