One thing I’ve learned from working for years in investment services …
The principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. In other words, the risk-return tradeoff says that invested money can render higher profits only if it is subject to the possibility of being lost.
Because of the risk-return tradeoff, you must be aware of your personal risk tolerance when choosing investments for your portfolio. Taking on some risk is the price of achieving returns; therefore, if you want to make money, you can’t cut out all risk. The goal instead is to find an appropriate balance one that generates some profit, but still allows you to sleep at night.
It’s all about risk/reward; sometimes you have to lose a little to gain a lot … but somewhere along the line you have to decide when it’s time to cut your losses and recoup.
And this concept holds true in so many aspects of life.