Investing classroom: Investing for the long run

Lesson 1.3: The third in our series of investment lessons considers the risk/reward dynamic of equities investing

Morningstar 12.10.2009

In the last lesson, we noticed that the difference of only a few percentage points in investment returns or interest rates can have a huge impact on your future wealth. Therefore, in the long run, the rewards of investing in equities can outweigh the risks. We'll examine this risk/reward dynamic in this lesson.

Volatility of single stocks
Individual equities tend to have highly volatile prices, and the returns you might receive on any single equity may vary wildly. If you invest in the right equity, you could make bundles of money. On the downside, since the returns on equity investments are not guaranteed, you risk losing everything on any given investment. There are hundreds of examples of dot-com investments that went bankrupt or are trading for a fraction of their former highs. Even established, well-known companies such as Enron, WorldCom, and K-mart filed for bankruptcy, and investors in these companies lost everything.

Between these two extremes is the daily, weekly, monthly and yearly fluctuation of any given company's share price. Most equities won't double in the coming year, nor will many go to zero. But do consider that there will inevitably be a considerable difference between the yearly high and low share prices of the typical equity on the London Stock Exchange.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

Lukeaksesi artikkelin liity Morningstarin perustason jäseneksi.

Rekisteröidy ilmaiseksi

Tietoja kirjoittajasta

Morningstar  

© Copyright 2020 Morningstar, Inc. Kaikki oikeudet pidätetään.

Käyttöehdot        Yksityisyys        Evästeet