What is Risk and Return?
No matter what your investment plan is, there is always some risk attached to the return. While experts consider that to make money - To lessen the risk factor, investments should be as wide as possible. That old adage about not putting all your eggs in one basket holds true for investments. Diversification is what minimises risk to a great degree, since if one sector bombs out, you still have money in other sectors that may be doing quite well. rather than store what you have - you need to invest in shares, they also realise that there will be a certain risk involved. If you buy at a high price and the market falls, then you run the risk of not only not making a profit, but losing what you invested.
Generally, the higher the risk the higher the potential return is. But if you have no stomach for risk, you can choose the low-risk shares, although even they pose significant risks at times. The risk with so-called low risk investments is that if the money you make is lower than the inflation rate then you will either make nothing or lose money. Another type of risk is in timing. If you sell your investment at the wrong time, then you stand to lose money, or not make as much as you could, had you sold at a more propitious time.
To lessen the risk factor, investments should be as wide as possible. That old adage about not putting all your eggs in one basket holds true for investments. But if you have no stomach for risk, you can choose the low-risk shares, although even they pose significant risks at times. The risk with so-called low risk investments is that if the money you make is lower than the inflation rate then you will either make nothing or lose money. Another type of risk is in timing. If you sell your investment at the wrong time, then you stand to lose money, or not make as much as you could, had you sold at a more propitious time. Diversification is what minimises risk to a great degree, since if one sector bombs out, you still have money in other sectors that may be doing quite well.