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4. Analyzing Company Fundamentals > Are You Walking on the Wild Side?

Are You Walking on the Wild Side?

Make sure that the investment return your portfolio is earning sufficient compensation for the risks you take.

In investing, risk and return walk hand in hand—the more risk you accept, the more return you should earn. Some investors are so afraid of losing money that they play it safe, purchasing certificates of deposit or hiding money under the mattress. Unfortunately, no investment is without risk. Even if you hide money in your mattress, it can burn in a fire with the rest of your belongings! At the other end of the spectrum, you might be willing to take big risks to grab big gains. In this case, the key is to accept risks only when the payoff justifies the potential losses. By understanding the risks you take and balancing those risks with your investment return, you can reach your financial goals without unnecessary jolts to your system.


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