Macro Mondays: Risk & Diversification (Part 5 of 5)
We will wrap up our discussion of risk and diversification on Macro Mondays (on Tuesday) with some finals thoughts from Investopedia. Always remember that minimizing risk is not a guarantee of returns -- investing is a very theory-heavy discipline and although we can predict, we cannot be 100% certain.
For more information on risk and diversification, visit Investopedia by CLICKING HERE.
We all face risks every day – whether we’re driving to work, surfing a 60-foot wave or investing. Even though it’s impossible to eliminate all risks (even staying safely at home on the couch involves health-related risks), there are ways to minimize the risks.
Expected return may not be the actual return!
In the investing world, risk refers to the chance that an investment’s actual return will differ from the expected return – the possibility that an investment won’t do as well as you’d like, or that you’ll end up losing money. The most effective way to manage investing risk is through diversification. Although diversification won’t ensure gains or guarantee against losses, it does provide the potential to improve returns based on your target level of risk. Finding the right balance between risk and return helps ensure you achieve your financial goals while still being able to get a good night’s sleep.
For more information on risk and diversification, visit Investopedia by CLICKING HERE.
