Investment is risky business. While there is the chance of significant gains, there is also a chance that things won’t go as planned and that significant losses will be made.
One of the main reasons for investing is that investment opportunities offer potential for large returns. The chance to profit after taking a risk is often too good to pass up for many people.
There are low and high-risk investments – the latter being based on the high probability of substantial loss of capital or of an investment underperforming.
The tricky part is knowing one’s propensity for risk. Higher levels of risk may result in big payouts in short periods of time. So the bigger the risk one is prepared to take, the better the chances of them earning impressive returns.
Stocks, bonds and cash are typically considered safe investments.
Hedge funds, on the other hand, are high-risk, mainly because they pool capital from large numbers of investors to invest in a variety of opportunities and asset classes.
Venture Capital is also regarded as high-risk investments. They are risky because businesses that are backed typically return little to nothing. If you an investor, opting for this investment route is high risk because you may not make your money back. This isn’t always the case, even though it happens quite frequently.
With angel investing, this is regarded as high-risk too, as individuals invest their own resources in the hopes of securing long-term returns. These aren’t guaranteed, because the company invested in may or may not achieve long-term success.
No matter the type of investment you may opt for, it’s vital to have a clear plan for how to achieve your goals.