Lots of the smart moves in investing—asset allocation, diversification—are to offset one thing: risk. Risk in investing really boils down to one thing: losing your money, even including your principal.

The flip side (and the fun side!) of the equation is return. Return is the earnings you can make on an investment that increases in value. It’s also called gain. It’s also any income you get from the investments, including dividends and interest payments.

So the trick is to balance the good and the bad—risk and return. Some investments are riskier than others. For example, a money market fund is pretty safe, because it would be unusual to lose what you initially invested (also called your principal). But your return will most likely be fairly small. On the other end of the spectrum, it’s possible to make a good deal of money investing in stocks. But they can also go way down in value. This change in value is called volatility. That’s because there's never a guarantee on your stock investment, and lots of different factors in the economy can affect your return.