What is the relationship between risk & return?

When investing, it is critical to understand the relationship between risk and return for different investments. It is also important to have an idea of how long you plan on being invested for. Being invested for the long term allows you to hold on to your investments during market volatility and wait for the upside. This infographic highlights the different types of investments and the relationship between risk and return.

Risk & return

Cash

Saving accounts, GICs and money market funds.
Unlikely to lose money, but you will also have a lower return that may not be greater than inflation.

10 year government bonds

Considered low-risk investments since the government backs them.
Generally pay low interest rates.

Corporate bonds

Issued by companies and can range from start-ups to large corporations, all with varying levels of debt.
Credit risk is higher than government bonds so they usually offer a higher yield.

Large cap stocks

These are corporations with large market capitalization.
Tend to be more mature and grow slower so are less volatile than small cap stocks.

Small cap & value stocks

These corporations have fewer publicly traded shares and generally have less access to capital.
Considered riskier and more volatile, and these stocks are generally more affordable.