Investing Basics

Understanding Risk

When you invest money, there is always a risk. This risk varies depending on the type of investment that you make. For instance, investing in bonds is a lot less risky than investing in stocks.

The safest investments are cash investments, followed by government bonds, corporate bonds, investment funds, stocks, derivatives, collectibles and unregulated investments (i.e. cryptocurrencies).

There is a correlation between risk and reward. The higher the risk, the larger the return that an investor should expect to receive. At the same time, with higher risk comes a greater risk of losing money.

By building an efficient portfolio, investors can reduce levels of risk while still enjoying their desired return. Investing for the long term also helps to reduce risk as investments have more time to perform.

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