How does risk and return affect my choice?
Investment risk and return are related. Generally, the higher the expected return the higher the risk. Or, the greater the likelihood you will experience negative returns from time to time.
Ultimately, your investment option choice should reflect your risk tolerance and investment timeframe.
Each option has a risk and return profile; if you want a higher return over the long term, you generally must accept more volatility in the short term. If you are risk adverse, you may prefer a conservative option. Keep in mind that long-term investors have more time to ride out periods of poor performance.
Which option is right for me?
You may like to consider these questions for your situation:
- What is my likely investment timeframe? In other words, how long until you retire and begin to access your final CSS benefit? Is it a short or long time?
- What level of earnings do I seek? The higher the potential earnings, the greater the potential investment volatility – which means the greater the likelihood earnings will be negative from time to time.
- What level of investment risk can I tolerate? Keep in mind different investment options provide different levels of risk; and you must decide which option and level of risk you are most comfortable with.