The Why, What & How of Investments

Keep these simple concepts in mind when making investment decisions:
The greater the reward, the greater the risk. There is no such thing as a riskless investment. It is all but impossible to increase the performance of a portfolio without also increasing the risk. You may be able to reallocate your investments among different types of investments or swap one stock or bond for another to take advantage of mispricings in the market. But beyond that, if you want to increase your return, you'll have to take on more risk. The longer the time period you intend to leave your money invested, the more risk you can afford to take.
The relative performance stability of an investment, such as stocks or bonds, must be judged relative to the time horizon of the investment. For example, stocks historically return more than twice as much as bonds over a long...