5 financial terms not to take for granted

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How much you stand to earn on an investment is the exciting part of the investment process. Many investors dream of being the financial guru whose stock-picking ability makes family and friends rich. However, just as the word "left" is always accompanied by "right," and "up" is inextricably tied to "down," returns must always be weighed against the risk being taken to achieve them.

"When returns are being discussed, investors need to understand all the risks being taken. The greater the return a product is offering, the greater the risk involved," says Palushaj. Hebeler says, too, that the time-tested disclaimer -- "past returns are not indicative of future returns" -- is there for a reason. "The markets are driven by events, not statistics, and since you can't predict events such as war or natural disasters, you can't depend on past returns and good track records," he says.

Palushaj cautions investors about the recent stock market highs. "This year the market is running away, which has made people more willing to take more risk," she says. "But they need to know how the asset has performed over slower periods as well."


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