Vanguard understands risk and return

In an instant

  • Expect high (and low): The price of an investment can fluctuate, which affects the value of the shares you own at any time.
  • Investing – and taking some risks – allows you to grow your money so that it can maintain its purchasing power over time.
  • The combination of your assets plays a big role in how much you risk and how your portfolio performs over time.

Considering the difficulties of professionals and making decisions based on current information is part of life and they are also part of the investment. The information below can help you understand investing so you can confidently build a portfolio centered on your goals.

Prices go up … and prices go down

When you invest, you buy shares of an investment product, such as a mutual fund or an exchange-traded fund (ETF). You can share your property Value increases or decreases over time. Some of the things that can affect the value of an investment include supply and demand, economic policy, interest rates, inflation and inflation.

If the shares you own have risen in price over time, your investment is appreciated. But it can go either way; There is no guarantee

For example, say you invested $ 500 in a mutual fund this year. At the time of your purchase, the fund was priced at $ 25 per share, so your $ 500 investment bought you 20 shares.

The following year, if the fund’s value increases by শেয়ার 30 per share, your 20 shares will be worth $ 600. Next year, if the fund’s share price drops to 20, your 20 shares will be worth $ 400.

Did you know

Mutual funds and ETFs are investment products sold by shares.

A mutual fund invests in various underlying securities and the price per share is established on a business day once the market closes (usually in the afternoon, at noon, east time).

An ETF contains a collection of stocks or bonds, and the price per share fluctuates throughout the day. ETFs are traded on a major stock exchange such as the New York Stock Exchange or Nasdaq.

Why take the risk?

You’ve probably seen this disclosure before: “All investments are at risk, including the potential loss of the money you invest.” So why invest if it means you can lose money?

When you invest, you take a chance: the value of your investment Can Get down. But you also get a chance: worth your investment Can To climb. Taking some risks when you invest gives you the potential to grow your money. If your investment grows faster than the price of goods and services over time (aka inflation), your money retains purchasing power.

Let’s say you invested এক 1,000 at one time in 2010 and haven’t touched it in 10 years. At this time, the average annual rate of inflation was 2%. As a result, your original $ 1,000 investment must be at least 1 1,180 to maintain purchasing power in 2010.

  • In Scenario 1, say you invest in a low-risk money market fund with a 1% 10-year average annual return. * Your investment increases by $ 105, so you have $ 1,105. Your 1,105 will buy less in 2020 than your actual বিনিয়োগ 1,000 investment that will be bought in 2010.
  • In Scenario 2, suppose you invest 4% in a medium risk bond fund with an average annual return of 10 years. * Your investment increases by $ 480, so you have $ 1,480. After adjusting for inflation, your 4 1,480 balance dropped to 1,214.
  • In Scenario 3, say you invest 13% in a high-risk stock fund with a 10-year average annual return. * Your investment increases to $ 2,395, so you have $ 3,395 After adjusting for inflation, your $ 3,395 balance drops to $ 2,785.

More info:

See how the risks, rewards and timing relate

An “average annual return” includes changes in share price and reinvestment of dividends and capital gains. The fund distributes both dividends and capital gains to shareholders. A dividend is a distribution of the profits of a fund, and a capital gain is the distribution of income from the sale of shares in the fund.

Depending on the time and amount of your purchases and withdrawals (including whether you reinvest dividends and capital gains), the performance of your personal investment may differ from the average annual return of the fund.

If you do not withdraw the proceeds of your investment, you are reinvesting it. Re-invested dividends and capital gains create their own dividends and capital gains – a phenomenon known as compounding.

How much risk should you take?

The more risk you take, the higher the return. The less risk you take, the lower your return. But that doesn’t mean you have to be wary of the wind for profit. This simply means that risk is a powerful force that can affect the outcome of your investment, so keep that in mind when you build a portfolio.

Work towards the right goal

Assign your assets to a mix of stocks, bonds and cash in your portfolio. It drives your investment performance (i.e. your return) more than anything else – even more than your own investment. Because allocating your assets plays a big role in your risk exposure and investment performance, choosing the right one The goal Asset allocation is the key to building a portfolio centered on your goals.

* This is a hypothetical scenario for illustrative purposes only. Average annual income does not reflect actual investment results.


All investments are at risk, including the potential loss of money you invest.

Diversity does not guarantee gain or protect from loss.

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