As a rule of thumb, the potential return on any investment should correspond to its level of risk. How much risk you should take depends on both subjective factors, such as how comfortable you are with market fluctuations, and objective ones like how long until you'll need the money. Here's a quick review of various kinds of investment risks.
Market risk is the possibility of losing money because of a market decline.
Since one dollar doesn't buy as much today as it did five years ago, it's reasonable to assume that twenty years from now, it'll buy much less. Inflation risk may well be the most important concern for the long-term investor. Conversely, of course, the same investments may gain in value when interest rates decline. But timing the market means you have to guess right twice and being wrong about either a dramatic rise or a sudden fall in prices can mean a significant loss to you. Foreign investment risk includes exposure to political events, currency exchange rate changes, and other special conditions that affect the value of investments traded or located in foreign countries in particular. .