Had trouble with any definitions from the list of investing tips? Here are some explanations!
1. Over the long term, stocks have historically outperformed all other investments.
Stocks have always provided the highest returns of any asset class, close to 10% over the long term. The next best performing asset class is bonds.
2. Over the short term, stocks can be hazardous to your financial health.
On Dec. 12, 1914, stocks experienced the worst one-day drop in stock market history — 24.4% . Oct. 19, 1987, the stock market lost 22.6%. More recently, the shocks have been prolonged and painful: If you had invested in a Nasdaq index fund around the time of the market’s peak in March 2000 you would have lost three-fourths of your money over the next three years. And in 2009, stocks overall lost a whopping 37%.
3. Risky investments generally pay more than safe ones (except when they fail).
Investors demand a higher rate of return for taking greater risks. The longer investors have to wait for their final payoff on the bond, the greater the chance that something will intervene to erode the investment’s value.
(CNN Money, Investing Your Money Basics)