It’s Your Money: Risk vs. Reward

Building up enough savings can help you meet some of your financial goals, like being financially secure for the short term. However, in order to achieve some of your long term goals like retirement, or paying for your child's education, you're going to have to become an investor.

Investing is the act of purchasing assets with the goal of increasing your future income, and it involves some level of risk. Risk is the uncertainty about how much money you'll make on an investment. In fact, there's even the risk that you'll lose money. But where there's risk, there's reward. By investing, you'll have the opportunity to make much more than you would with a savings account.

Being a smart investor is all about managing risk. Before you can do that, you'll have to understand your risk comfort level, as well as how this comfort level will change at different points in your life. For example, you might be a big risk taker now, but when you have others depending on you, or as you approach retirement, your attitude about risk may change dramatically.

Essential Question

• How do financial risks and rewards affect my investment decisions?