Why do you need to know about risk?
Any investment decision you make means that you must take a risk of some sort. And the decision will relate to the amount of money you invest, your circumstances at the time and your needs for the future. Basically, risk is the chance that you will not achieve your financial goals.
Tip: The Golden Rule is – The higher the expected returns, the higher the likely risk.
Usually when you make an informed decision to take on a certain risk, you create the opportunity for greater returns. Generally, the higher the level or short-term risk you are prepared to accept when investing, the higher long-term potential return will be. At the same time, the potential loss may also be higher. This is called the risk/reward trade-off.