Source: Vanguard.com

This description explores the relationship between risk, reward, and time in investing. It emphasizes that time plays a crucial role in reducing risk and enhancing returns. The discussion begins by acknowledging that investing always carries some level of risk, but understanding the risk-reward balance is key to making informed investment decisions. Diversification—spreading investments across different asset classes and issuers—is highlighted as an effective strategy to minimize overall risk. The concept of compounding is also explained, showing how reinvesting earnings can significantly boost returns over time. Through a hypothetical example, the explanation demonstrates how earnings on earnings can surpass the gains from the original investment, leading to exponential growth. The piece concludes by encouraging the development of a diversified portfolio to meet long-term financial goals like retirement or education savings.