Beware of Risky Investment Products
If you’re thinking about investing your money, you really need to be careful these days and beware of risky investment products by reading financial blogs. While some of the ultra rich have recovered from the recession of 2008 (that they helped cause) a lot of “normal” people are still struggling to catch up. Having said that, if you have any spare money you can invest, it can be a good way to grow your wealth – if you’re careful.
Tips for Investing Your Money
If you want to make some money by investing, here are some specific tips to make sure you don’t fall for risky investments that can end up causing you more trouble than they’re worth.
The first step is understanding the different types of risks that you will be taking:
Business Risk – This is the biggest risk when you’re investing. This is the risk that the company you’re investing in has financial problems. Even companies that are doing well now can have problems at some point in their life.
Call Risk – Some but not all companies have a provision that will allow them to buy back bonds. While you’re going to get your investment back this way, it could cause problems for your monthly income if you’re not careful.
Allocation Risk – As the old saying goes, you shouldn’t put all your eggs in one basket. This is true for investing as well. For example, you don’t want all your money tied up in stocks in case the market crashes again. Allocate your investments wisely to avoid risks.
Political Risk – Believe it or not, politics can have an effect on prices and investments. For example, if an oil producing country has political problems, it could drive up the prices of oil or send them plummeting in some cases. It’s the volatility that you should try to avoid if at all possible. Oil is the obvious example. However, there are other investment opportunities which may be put in danger as well due to politics.
Dividend Risk – This is a risk that the company you’re investing in will dilute their dividend. This can have a great effect on the money you’re investing. This is rare, but it’s still a risk you need to think about if you want to have all your bases covered. This goes back to making sure you don’t put all your eggs in a single basket.
Avoiding risky investment products
Understanding the types of risk above will help you avoid ones that are unnecessary when you’re investing your money. No matter if you just have a little money to invest or you’re investing millions, the same precautions should be taken. If you can avoid pitfalls, you might be able to earn enough to finally gain financial freedom for yourself and your family.
Leave a comment below if you’ve fallen prey to any risky investment products in the past.
Written by Campbell Fox who supports DepositAccounts.com – a bank comparison website.