You may have heard it said, "No risk, no reward." But did you know that time can decrease your risk while increasing your reward?
Points to know
- Different types of investments have different levels of risk.
- The longer you keep your money invested, the better your odds of overcoming any down markets.
- Your investment gains can grow exponentially over time as your earnings are compounded.
Investing: Risky business?
When some people think of investing, they focus on the potential for great rewards—the possibility of buying unknown stocks that increase in value many times over. Other people focus on the risk—the possibility of losing everything in a market crash or on a bad stock pick.
Who's right? Well, it's true that all investing involves some risk. It's also true that investing is one of the best ways to increase the amount of money you have available to meet your goals (although an expectation of immediate riches is highly unrealistic). In fact, there's typically a direct relationship between the amount of risk involved in an investment and the potential amount of money it could make. Different types of investments fall all along this risk-reward spectrum. No matter what your goal is, you can find investments that could help you reach your goal without taking on unnecessary risk.
Time is on your side
Here's the secret ingredient that could make investments less risky: time.
Based on history, if you invested in the stock market for 1 year, your chance of losing money would be greater than 1 in 4. But if you invested for 10 years, that number would drop to about 1 in 25—and after 20 years, to zero. *
