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Risk and Return

Risk and return are fundamental concepts in finance and investing. Risk refers to the possibility of losing some or all of your investment or not achieving expected gains. Return, on the other hand, is the profit or loss generated from that investment. Generally, higher potential returns come with higher risks; for example, stocks often provide greater returns than bonds, but they also come with more uncertainty. Understanding the balance between risk and return helps investors make informed choices about where to put their money based on their financial goals and comfort with uncertainty.

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  • Image for Risk and Return

    Risk and return are fundamental concepts in finance and investing. Risk refers to the chance of losing money or not achieving expected gains, while return is the profit or gain you earn from an investment. Generally, higher potential returns come with higher risks. For example, investing in stocks can yield high returns but also carries the risk of losing your investment. Conversely, safer investments like savings accounts offer lower returns but less risk. Understanding the balance between risk and return helps individuals make informed decisions that align with their financial goals and comfort with uncertainty.