As some investors already know, there is a distinct correlation between risk and reward. The greater the potential reward for an investment, the higher the risk. On the other side of the coin, lower-risk investments tend to produce lower rates of return.
This is something that many people often forget — especially those investors who are new to the game. If you pay attention only to a particular investment’s prior performance without looking at the potential risks involved, there could be devastating consequences for your portfolio later on.
Purchasing investments based solely on their rate of return is what’s known as “chasing yield,” and it’s a mistake that can and should be avoided. Find out more from host Johnny Dean and our advisor, Rick “The Professor” Plum, CFP® on this week’s episode of Managing Your Financial Future!
