THE MORE THE RISK, THE MORE THE POTENTIAL RETURN
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Successfully managing the risk-return tradeoff is
the goal of most investors. Financial experts have developed a
variety of measures, such as beta, standard deviation, and
covariance, to assess the risks of specific investments.
Diversification is a means of varying the kinds of assets you
invest in to maximize returns while minimizing risks. Depending on
their risk tolerance, investors might choose to pursue such
low-risk strategies as buy and hold or dollar cost averaging, or
take the higher risks of market timing strategies as they seek
higher short-term returns on their investments.
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