Risk always plays a role in investing. It’s not the most comfortable topic, especially when markets are volatile. It’s easy to get stuck on thoughts of what we stand to lose.
But there’s a lot more to know about risk than you might think. And here’s a reassuring fact: You can control the amount of risk you take on when you invest.
It all depends on your asset mix. That’s the breakdown of stocks, bonds, and cash in your portfolio. Different assets carry different kinds of risk, and in different amounts. Here’s what you need to know.
First, let’s talk about purchasing power risk. When you keep cash in a bank account, it’s pretty safe—you won’t lose money. The downside, though, is that you won’t really make money, and the interest you earn over time may not be enough to keep pace with inflation.
Here’s an example of what