Risk

Risk means the probability that you will lose money on an investment. A more technical definition of risk is the volatility of return on the investment. An asset with erratic returns is considered riskier than an asset whose value is static or moves slowly.

Few investments are risk-free. Investing in stocks, in particular, means accepting some level of risk. If you want to make a killing in the stock market, you are going to have to take risks. If you keep all your life savings in safe investments such as a savings account, you will face virtually no risk, but your returns will be small, and inflation will eat away at the value of your deposit.

There is a trade-off between risk and return. Less risk means less return, while taking on more risk brings the possibility of a higher return.

Levels of risk are a personal decision. They may be affected by your age, investment goals, time of life and how much you can afford to lose.