19. What is the risk?
There are two main investment risks:
- short-term volatility – regardless of the long-term outlook, short-term price declines are disconcerting
- inadequate long-term funds – an insufficient long-term rate of return may lead to insufficient capital to meet later life needs. Studies show that reward tends to be directly related to risk – i.e., more long-term return is usually accompanied by more short-term volatility risk. Yet some risk may result in major losses. Therefore, diligence is required.
Other risks include: poor bookkeeping, theft, transactions errors and bad investment decisions.
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