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Investing and Risk

One of the certainties of investing is risk. Every investment carries with it a potential reward (growth) and risk (volatility). Generally, higher risk investments carry greater growth potential and lower risk investments offer less growth potential. Historically, an investment's volatility declines the longer it is held.

Understanding the various asset classes can help you decide how to diversify your portfolio so that it meets your investment time horizon and tolerance for risk.

  Asset Class Description
Equity swatch Equity (stocks)
  • Stock or shares of ownership or equity in a company.
  • Have historically offered the best growth opportunities over the long term as well as the highest risk and volatility.
Fixed Income swatch Fixed Income
  • Fixed income investing refers to any type of investment or budgeting style that an issuer pays real return rates or periodic income at a set interval and at reasonably predictable levels. This may include bonds, bond funds, CDs, ETFs, and money market funds. Fixed income investors are usually pensioners or retirees who rely on a regular, stable income stream.
  • Are less risky and volatile than stocks, but have historically produced lower returns.
Updated 12/08/2015