In general, investments involving stocks and bonds earn a higher
rate of return than savings accounts. However, there is a trade-
off for that greater return, and that is the risk that the value
of your investments may not increase, but may actually decrease.
Here's an example of the risk–reward relationship: If you save
$1 every day from the time you turn 18 until you are 65 years
old, and your money earns 2 percent interest, you could have
nearly $28,468 when you reach 65. Because this investment has a
relatively low rate of interest, it's probably pretty low-risk.
Alternatively, if you invest the same amount in a stock mutual
fund that earns a 10 percent return, you could have nearly
$397,398 when you turn 65. However, because this investment has
a much higher return, it's likely more risky and volatile (lots
of ups and downs). This means there is a greater possibility
that you may not make money and, in fact, could lose some of
your original investment. Be sure to factor the risk–reward
trade-off into your