Risk and Return

You may be wondering how money is made on the market. Without knowing when and why decisions are made, investing can seem like a high-stakes roll of the dice—especially after the 2008 financial crisis. But investing is not gambling, and understanding the concept of risk and return will help you make better sense of what truly influences your investments.

What is Return?

“Return” is simply the change in value since the start of an investment. If a stock or other asset goes up in price and sells for a profit, it has a positive return; if the asset sells for less than its purchase price, it has a negative return. Some returns do not involve actively trading assets. A savings account at a bank provides returns through its interest rates, while stocks and bonds can payout dividends without needing to be sold.

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