Risk

A big, hairy deal when it comes to investments and borrowing.

Let's say that you want to start investing to make more money. Smart move. How much money you'll earn from your investments will depend on how much risk you are willing to accept. A savings account is very low risk—but the amount of interest you earn is also very low. Stocks are riskier. If the company starts doing badly, the value of stocks goes down, and you might not get a dividend. If the company succeeds, though, you can make a lot more than you would make with your savings account. Since you accept more risk with stocks, you get a shot at more money. Ya know—no guts, no glory and all that good stuff.

When it comes to risk, it's important to keep in mind how much time you have, how comfortable you are with risk, and how much money you have to invest. The younger you are, the more time you have to invest money before you'll need it—and the more risk you can accept.