Article Licenses: CA, DL, unknown, unknown, unknown
Advisor Licenses:
Compliant content provided by Adviceon® Media for educational purposes only.
Understanding investor risk/reward trade-offs.
The risk/reward concept states that the higher the risk of a particular investment, the higher the possible return. Although there is usually risk with any equity investment, assessing just how much risk your portfolio should carry is essential. Risk involves the potential for gain or loss of monies invested.
Many people take on more risk, hoping to achieve a higher return without regard to cyclic markets. If an investor expects higher returns based on the past, he must understand that markets can go through gain and loss periods.
In theory, many think that the higher the risk, the more you should receive for holding the investment. With cyclic markets, this is not necessarily true. Conversely, in theory, the lower the risk, the less you should receive. Unfortunately, the dilemma is this: a higher potential for above-average returns comes with a higher risk of below-average returns. Conversely, safer investments, such as cash and bond instruments, have a lower potential for high returns and a higher potential to not keep up with inflation.
While choosing investments for your portfolio, you need to be conscious of risk/return trade-offs and risk tolerance. Different types of securities have associated levels of risk. Every investor’s goal should be to find a balance that allows you to not experience undue anxiety in the markets and achieve your long-term financial goals at the same time.
Publisher's Copyright & Legal Use Disclaimer
All articles are a legal copyright of Adviceon®Media and are for educational
purposes only. The particulars contained herein were obtained from sources
which we believe are reliable, but are not guaranteed by us and may be
incomplete. This website is not deemed to be used as a solicitation in a
jurisdiction where this representative is not registered. This content is not
intended to provide specific personalized advice, including, without
limitation, investment, insurance, financial, legal, accounting or tax
advice; and any reference to facts and data provided are from various sources
believed to be reliable, but we cannot guarantee they are complete or
accurate; and it is intended primarily for Canadian residents only, and the
information contained herein is subject to change without notice.
References in this website to third party goods or services should not be
regarded as an endorsement, offer or solicitation of these or any goods or
services. Always consult an appropriate professional regarding your particular
circumstances before making any financial decision. The information provided
is general in nature and should not be relied upon as a substitute for advice
in any specific situation. The publisher does not guarantee the accuracy and
will not be held liable in any way for any error, or omission, or any
financial decision.
Life Insurance and Segregated Funds Disclaimer
Life Insurance policies vary according to contract terms. Please read any
Life Insurance policy contract provided, or the segregated fund summary
information folder prospectus before the time of purchase. Full details of
coverage, including limitations and exclusions that apply, are set out in
the policy of insurance. Commissions, trailing commissions, management fees
and expenses may be associated with segregated fund investments which may
not be guaranteed and their market value changes daily and past performance
is not indicative of future results. A description of the key features of a
life insurance policy, a segregated fund; and any applicable individual
variable annuity contract is contained in information provided by the
company from which it is purchased. Talk to your advisor before making any
financial decision. For specific situations, advice should be obtained from
the appropriate legal, accounting, tax or other professional advisors. The
information provided is accurate to the best of our knowledge as of the date
of publication and is general in nature, intended for educational purposes
only, and should not be relied upon as a substitute for advice in any
specific situation. For specific situations, advice should be obtained from
the appropriate legal, accounting, tax or other professional advisors.
Rules and their interpretation may change, affecting the accuracy of the
information.
