Risk Vs. Reward... The Last 50 Years

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Risk Vs. Reward... The Last 50 Years

Risk is something we encounter every day. With investments, understanding the relationship between risk and reward is very important. All investors want to maximize their potential returns, while minimizing risk. With this in mind, investing your hard-earned dollars can be a stressful process for many individuals.

Some investments are certainly less "risky" than others, but no investment is risk free. With investing, you should carefully consider your overall financial situation. Always bear in mind your ability to tolerate and assume risk, then choose a comfortable level of risk for yourself and select the appropriate investments. It may seem like there is an endless supply of securities investment products from which to choose. In actuality, there are three basic types of core securities investments: cash (or cash equivalents), stocks, and bonds. Stocks represent equity in, or partial ownership of, a company. Bonds are commonly known as "fixed-dollar investments" and are basically loans or "IOUs." Interest is earned on the money you lend. The prices of bonds do move up or down, but normally not as much as stocks. Here's an easy way to remember the difference between stocks and bonds: "with stocks, you own, with bonds, you loan."

It is possible to achieve higher returns from stocks rather than bonds, but you cannot expect to get higher returns without taking on additional risk. If you seek higher returns, you must be willing to accept higher risk. How much risk is right for you? The answer will affect your investment decisions. Typically, investing in a variety of investments, with a balanced portfolio mix, will allow you to benefit when each type is doing well, and also may limit exposure when one or more investments are performing poorly.

Contact your NYLIFE Securities Registered Representative or local General Office today.

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