Financial literacy education for the modern era.

Back to FoundationsModule 02 / Investing

Risk &Reward

Understanding the relationship between risk and potential returns is fundamental to investing. Higher returns require accepting higher volatility.

Risk-Return Simulator

Your Risk ProfileModerate

Balanced growth and stability

50%
ConservativeAggressive
20 years
Expected Annual Return9.0%
Expected Volatility20.0%
Best Case (20yr)$867,362
Expected (20yr)$56,044
Worst Case (20yr)$5,438
$216,840$433,681$650,521$10,000Year 0Year 10Year 20
Best Case
Expected
Worst Case

Key Concepts

Risk Tolerance

Your ability and willingness to accept portfolio volatility. It's influenced by your financial situation, investment timeline, and psychological comfort with uncertainty.

Time Horizon

Longer investment periods allow more time to recover from market downturns, enabling higher-risk allocations for those who can wait.

Diversification

Spreading investments across different assets reduces risk without proportionally reducing returns. The 'free lunch' of investing.

Volatility vs. Loss

Short-term volatility is not the same as permanent loss. Understanding this distinction is crucial for long-term investing success.