The Risky Side of Investing- Is it Worth it to You?

The following article is a guest post. The opinions of guest writers are their own and not necessarily those of the owner of this blog.
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The Risky Side of Investing- Is it Worth it to You?


No matter how you look at it, there is a lot of risk involved with investing of any kind. On the other hand, investing also brings with it the opportunity for reward. To decide if the risk is worth it to you or not you need to understand the unique relationship that exists between the two elements.



What is the Risk All About?



When it comes to the risk inherent in investing, there is a rule of thumb that states, “The higher the risk, the higher the potential return.” That is all fine and good but an additional point needs to be added to make this statement even more accurate. Instead the statement should read, “The higher the risk, the higher the potential return, and the less likely it will achieve the higher return.”



Deciding what you can comfortably live with in the world of investing is paramount. You need to be able to balance out the risk you are taking with the possible reward that could result.




Loss of Money



Many people look at investing in terms of the likelihood that they will lose money. When contemplating an investment, you need to decide if keeping the principal of your money is more important than the possibility of higher returns. You also need to ask yourself if you will be able to achieve your investment goals. If you lose instead of gain you do not want to shortchange yourself on your retirement fund. You also need to ask yourself if the added risk is worth it in order to achieve higher returns? Some people are more comfortable with risk exposure than others. There are investments that carry a minimum of risk; however the opportunity for return is often minimal as well.



Financial Goals



In order to understand whether you stand a chance of achieving your financial goals or not you need to consider the amount of money you have invested; the length of time invested; the rate of growth or return; and the fees, inflation and taxes that will cut into your return. If you are not willing to take on much risk then you must bear in mind that the return you earn will be less. In order to compensate for the lower anticipated return you should increase the money that you invest as well as the duration of time you invest it for.

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The opinions of guest writers are their own and not necessarily those of the owner of this blog.