Risk isn't just your favorite board game.
Investors have to deal with another type of risk on a day-to-day basis: investment risk.
U.S. Treasuries are often called "risk-free" investments. It's the least risky investment, because people don't believe that the U.S. government could default on bond payments.
For everything else then, there is some risk attached. We can think about the risk of an investment as the probability of losing all or some significant portion of the investment.
So why don't people simply invest 100% in U.S. bonds and call it a day? Why take on any risk at all?
The answer is that the market rewards investors for taking on risk. Historically, the riskier an investment is, the higher its return will be. So government bonds have lower risk and return, than corporate bonds, which in turn return less than blue-chip stocks and so on.…
