three risks worth taking

Markets can be chaotic, but over time they have shown a strong relationship between risk and reward. This means that the compensation for taking on increased levels of risk is the potential to earn greater returns. According to academic research by Professors Eugene Fama and Ken French, there are three “factors” or sources of potentially higher returns with higher corresponding risks:

Fama and French found that this "three factor model" explains the majority of stock returns. The risks associated with investing in stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal. Small-cap stocks may be less liquid than large-cap stocks. Investors with time horizons of less than five years should consider minimizing or avoiding investing in common stocks.