Reward
Determining the appropriate risk that you will take should be directly related to factor such as the reward you expect and your time horizon. Investors are paid directly for the risk they assume. Investors who are looking for long term growth can afford to take riskier positions while those who are already retired and live on a fixed income should consider investments which focus on capital preservation.
Types of Investments
Stocks and bonds are the most common financial instruments used to generate returns. Bank deposits,and Certificates of Deposits prior to the financial crisis in 2008 were widely used methods, but with short term interest rates below zero, it is tough for an investor to create any substantial return using standard bank instruments.
Banking instruments which are covered by the Federal Deposit Insurance Company (FDIC) are nearly riskless, and represent therisk free rate of return you can achieve.
To achieve a return beyond the risk free rate, you will need to take additional risk. The larger the risk youtake, the greater the opportunity for substantial performance.
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