Investing 101: Risks & Rewards
For anyone interested in building wealth, investing is a great way to do it. If you have plans on making a million dollars before you’re 25, the sooner you understand investments, the better!
Taking the Risk. The biggest difference between “saving” and “investing” money is in the level of “risk.” Simply put, risk represents the possibility that you may lose your money.
Savings accounts are typically insured by federal organizations, so it’s almost impossible to lose your money. Investments, on the other hand, are not insured so you may lose all or part of your money. Why invest if you might lose money? With risk comes the potential of higher returns – more money!
What’s Your Risk? Before you decide where to put your money, you should determine your level of risk. Do you want to be “aggressive” and place your money in very risky investments, or do you want to play it safe? Think about how you live your life. Would you rather get $10 on a sure thing, or are you the type of person who would take a 50/50 chance to win $25?
Some experts say that young people have the benefit of investing with higher levels of risk. No matter what your age, or aggressiveness, you should never invest money you can’t afford to lose. After all, investing is meant to build wealth, not leave you broke. Before you invest your first dime, learn all you can and be comfortable with any decision you make.
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