The theory sounds great, but it does not always work out this way. For instance, you could select a conservative bond fund and an aggressive growth fund. You might expect more return from the aggressive growth fund than the bond fund, but sometimes expected results do not materialize. This is the uncertainty principle. To view a Risk Return Graph Click Here and see the escalator effect of risk and return and the types of funds that fit into this model.
Risk comes in a variety of forms and fashions.
Below are the different types of risk you may encounter. Types of Risk Business Risk Uncertainty about the rate of return from an investment caused by the nature of the business. The most common types of business risk are uncertainty about sales and operating expenses. Exchange Rate Risk Risk associated with the conversion of the currency of one country into the currency of another country. Inventory Risk Risk that price changes will cause a decline in value of a company's inventory.