The key principles are: 1. History shows that risk and return are related. 2. The risk of investing in common stocks and bonds depends on the length of time the investments are held. The longer an investor’s holding period, the lower the likely variation in the asset’s return. 3. Dollar-cost averaging can be a useful, though controversial, technique to reduce the risk of stock and bond investment. 4. Rebalancing can reduce risk and, in some circumstances, increase investment returns. 5. You must distinguish between your attitude toward and your capacity for risk. The risks you can afford to
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