Many young investors jump into investing without knowing how to define their risk. The first step is to determine what you can get without taking any risk.
Investors consider US Treasuries risk-free assets, so we can start our investing journey by understanding these bonds.
Once you learn how to find the Federal Funds rate, inflation rate, and current Treasury yields, you can start to determine your risk.
For instance, if the government gives you 5% on a 10-year Treasury Note, why would you take a certificate of deposit for 4%?
There could be other factors for accepting the CD, but at least you can balance your decisions with the other elements.
We all define risk differently; that's why many investment products exist. However, the first step is always seeing what the government will give us for borrowing our cash. Good Luck!
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