Unpredictable returns

In investment terms, a "risky" investment is a volatile one – an investment where returns can vary a lot from year to year.

Of course if it were possible, we would like to earn the highest possible return, with the lowest possible risk! However in investing, there is generally a tradeoff between risk and return. That is, the higher the long-term potential return from an investment, the higher the short-term volatility.

The good news is that generally returns become less volatile over time. So long as you are invested in good quality, well-diversified assets, then the longer you’re invested for, the more predictable your returns become.

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