Risk and Return

Risk-Return Relationship

Higher potential returns come with higher risk. Fixed deposits give 6-7% with near-zero risk. Stocks can give 12-15% long-term but with significant short-term volatility. The key is managing risk, not avoiding it.

Diversification - Don't Put All Eggs in One Basket

Diversification means spreading investments across different stocks, sectors, and asset classes. If one stock crashes 50% but is only 5% of your portfolio, your total loss is just 2.5%. Example: Hold stocks from IT, Banking, FMCG, Pharma sectors instead of only one sector.