What is the secret behind investments?

Knowing good investments from risky ones and knowing where to put your money is essential to your success.

07:31 17 December 2013

The first step in choosing the right investments is to understand what a risky investment means.  There are some people who will argue that the entire nature of investing in anything is risky and therefore every investment opportunity qualifies. This however, is not the case. While there is an element of risk involved with any investment, not every investment opportunity can be termed risky.

The first step to identifying what type of investment you are looking at is to know the difference between a solid investment and a risky one.

• A solid investment opportunity is going to provide you with a wealth of information. Transparency is a must. The less information provided, the less willing people are to provide you with information, or the less you can find on the subject the more risk there is in the investments.

 

• There is a good adage, ‘If it sounds too good to be true. It probably is’. You should follow this with every investment. If everything looks a little too neat, if the return, seem well above average for the type of investment you are looking at, you may want to look elsewhere. Risky investments come with unrealistic terms.

 

• It is not always the investment that makes it risky. The investor can have a lot to do with how risky an investment is for them. If you, as the investor, do not understand something, make sure to ask. Get things clarified if you are unsure of something. You need to know everything you can about the market, the product, and the terms before determining what the risk factor is to you.

Investments are generally risky because they are an investment. You can however diminish the risk by having a clear understanding of the product, the terms, and the returns offered.