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When you decide to invest money, there are 2 important things to consider: Risk and Return.
RISK is the uncertainty and variability of the outcome of an investment. It is the possibility that your investment may or may not make any money, or even that you may lose the money altogether.
RETURN is the gain or loss from an investment over time. Positive return means that your investment made money, and negative return means that you lost money.
It is difficult to know how well an investment will do. But you can group investments into 3 general groups:
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Low-Risk, Low-Return: Like treasury bonds issued by the government; there is a low risk of losing money, but these do not offer very big returns.
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Moderate-Risk, Moderate-Return: Like index funds; these offer diversification and generally have a lower risk than individual stocks but still offer decent returns.
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High-Risk, High-Return: Like penny stocks or cryptocurrency; these might offer huge returns if the investment does well, but also carry the potential to become worthless.
There is no such thing as a Low-Risk, High-Return investment, if you are looking for a high return on your investment, you will have to make a high-risk investment.
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