Risk and Diversification: Conclusion

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.