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In the investment world, future outcomes are unknown which means that investors constantly need to accommodate a degree of uncertainty. In general investors do not like uncertainty and try to minimize it whenever they can. From a fundamental perspective, the way to reduce the uncertainty is to do your homework. Warren Buffett is arguably the most successful investor who has ever lived, and the secret of his success is that he studies 2000 sets of company financial statements every year - in other words, he does his homework. The more stable a company's past earnings stream, the more probable it is that its earnings will continue to be stable. So, investors look for companies which have a long track record of steadily rising earnings - and they are willing to pay a higher price for such shares because the risks are lower. This can be seen in the share's multiple. From a technical perspective, risk is a function of unpredictability which in turn is a function of volatility. The more volatile a share price chart is, the greater the risk. The most predictable and desirable chart is an upward sloping straight line and to the extent a share's chart departs from this it becomes volatile and less certain. But volatility increases the opportunity for capital gain. Risk-free investments are almost always also return-free.

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