Money Rules to Live By VII

The role risk plays
Every human endeavor carries some risk, and investments are no exception. What differs is the amount and type of risk and how you're compensated for taking it.
The 30-day Government Treasury bill, for example, is one of the "safest" investments around if you're solely concerned with getting back your original investment. The T-bill is backed by the full faith and credit of the government. But the average return on a 30-day T-bill over the past years is just 3.34%. That's just above the historical 3% inflation rate for the same period; if you factor in taxes, you probably lost money! Don't forget: GST is gearing up to 7% soon!!
Large-company stocks, by contrast, returned an average 10.4% annually during the same period. That handily beats inflation, but as everyone who has invested in the past decade knows, stocks aren't a sure thing. There were plenty of years along the way that the market for large-company stocks dived, and if you invested all your money in a single stock -- say, Enron -- you could be wiped out. That's called market risk.
Here's what you should take away: You'll almost certainly need to take some market risk if you want to grow your wealth and beat inflation over time. But you should also be wary of anyone who "guarantees" a high return on an investment. If you're earning much more than the going rate on a T-bill, you're taking some risk, and you should understand that risk before proceeding.