Are Risky Investments Worth a Shot At?

There is a general rule of thumb with investments that goes something like this: the higher the risk the better the rewards if you are lucky enough to get them. Some people are more amenable to taking risks with their money than others, but it doesn’t suit everyone.

Therefore the answer to the question posed in the title of this article will depend on your own individual point of view. Some readers will already have come up with their answer – a definite yes or an equally definite no. Those who have yet to make up their minds will undoubtedly fall somewhere in the middle. They will be tempted by the idea of big returns but the thought of equally big losses will be pulling at them too, making them doubt whether they should invest in such chancy areas at all.

Assessing the degree of risk

This is worth doing because we all have different ideas as to what constitutes risk. For example you might think an investment looks pretty safe whereas the exact same thing might seem too risky to me. It all depends on your individual point of view.

Either way you should be properly informed before you make this decision. The more knowledge you have the easier it will be to see whether your particular risk levels will be surpassed with a specific investment.

Could you afford to lose the cash you invest?

The riskier the investment the more important it is you consider what you would do in the worst case scenario. If an investment is as risky as it seems, you should ensure you focus on the potential of losing the cash. It is easy to be dazzled by the potential of gaining – so much so you don’t think about the potential to lose what you invested in the first place.

So consider this – what would you do and where would you stand if you lost the cash? You should only ever go into this type of investment with cash that is surplus to your requirements. Don’t invest money you need to double to make the mortgage payment next month. This is the one rule you can never break when considering risky investments of any kind.

Once again it all comes down to knowledge, information and personal opinion. Once you have all the right information you can see whether each specific investment you come across will be too risky for your needs and appetite or not. In some cases you may never feel happy with any degree of risk; in others you may be fine with some but not with others. Whatever you personally decide you can see there is no single answer to the question in the title. It only matters that you know which answer is going to be right for you.

The next time you come across a particular investment that looks promising in terms of returns, you know what to do to get the answer you need.