Risk in Investment

Investment Risk

In what ever investment you plan to invest, you need to study about the risk of that investment.

Risk is an inherent part of investing. Generally, investors must take greater risks to achieve greater returns. Those who do not tolerate risk very well have a relatively smaller chance of making high earnings than do those with a higher tolerance for risk.

It's crucial to understand that there is an inescapable trade-off between investment performance and risk: Higher returns are associated with higher risks of price fluctuations. Stocks historically have provided the highest long-term returns of the three major asset classes and have been subject to the biggest losses over shorter periods. At the other extreme, short-term cash investments are among the safest of investments when it comes to price stability, but they have provided the lowest long-term returns.

Over short periods—even periods lasting a few years—lower-risk investments may provide better returns than higher-risk investments. But historically over long periods, riskier assets have provided higher returns.