I want to manage my finances

Investing: What is the relationship between risk and return?

You can choose to invest your money in different financial products. Each one has its own special features. Some investment have low risk and their return is also lower. Others offer you higher potential returns with a higher risk.

The chart below shows that the higher the potential return, the higher the risk is as well!

Guarantedd investments also exist. In some cases, only the money you invested at the outset, in other words your "capital", is guaranteed. In other cases, both your capital ans the return, or the money your investment makes for you, are guaranteed.

Here are a few of the most popular financial products and an indication of the degree of risk associated with each one:

Stocks

Red light.

Bonds

Yellow and red light.

Mutual funds

Yellow and red light.

Guaranteed investment certificate with a fixed rate of interest at maturity

Green light.

Note that risk is not the only factor to take into account before choosing an investment product. You also need to know the description of the investment, its potential return and its liquidity (possibility of withdrawing the investment). But before anything else, you need to know what type of investor you are!