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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
The possibility of losing some or all of your investment.
Why It Matters
Risk is the price of potential reward. The stock market averages 10% returns because it can drop 30% in a bad year. Treasury bonds pay less because they're safer. Understanding and accepting risk is fundamental - you can't earn returns without taking some risk, but you can choose how much.
Key Points
- Higher potential return = higher risk (there's no free lunch in investing)
- Risk isn't just losing money - it's also missing your financial goals
- Time reduces risk: a 30-year horizon can weather crashes that devastate short-term investors
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Understanding Risk
Get a complete explanation with examples, key takeaways, and a quiz to test your knowledge.
Related Terms
Common Questions
The possibility of losing some or all of your investment. Risk is the price of potential reward. The stock market averages 10% returns because it can drop 30% in a bad year.
Risk is the price of potential reward. The stock market averages 10% returns because it can drop 30% in a bad year. Treasury bonds pay less because they're safer. Understanding and accepting risk is fundamental - you can't earn returns without taking some risk, but you can choose how much.
Higher potential return = higher risk (there's no free lunch in investing)
Risk isn't just losing money - it's also missing your financial goals
Time reduces risk: a 30-year horizon can weather crashes that devastate short-term investors