Creating a portfolio Evaluating risks and returns is basic to any savings and investment plan. As a rule of thumb, the potential return on any investment should correspond to its level of risk. Most experts agree that you shouldn't take too much risk with your pension accumulation. On the other hand, it's important to take enough risk to build assets that will finance a comfortable retirement. Here's a quick review of various kinds of investment risks.
Market risk is the possibility of losing money because of a market decline.
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. 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 conditions that affect the value of investments traded or located in foreign countries.