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Risk

Merriam Webster Dictionary defines risk as "exposure to possible loss",
others define it as "adverse deviation from the desired outcome".

Risk, in investing, is chance that your expected returns are never realized,
and that your investments themselves lose value. In short,
investment risk is
not having the money you expected when you need it.


A well diversified, asset-allocated portfolio can eliminate
many specific investment risks leaving only general market risk
.

Market risk can never be eliminated, but it can be reduced by time,
the more time you have to allow your investments to work, the less chance
you have of being forced into taking a realized loss.

Over short periods of time, markets are volatile and react primarily to speculation.
Over longer time periods, markets are less volatile— speculation still influences
returns, but market gains become more directly attributable to the sum of corporate dividends and corporate earnings growth.

These are the facts, and we have to live with them. As an investor, you
must be willing
to put up with the short term fluctuations— history has shown that the market can be
most rewarding to patient investors.

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