The Dow fell 310 points on Friday December 11, 2015 due to the continual decline of big energy stock prices. Oil-driven trading has remained a pillar of Wall Street for over a century: when it does poorly, the whole house starts to quiver. Who knew such a seemingly invincible investment was capable of seeing a seven-year-low?
No investment is impervious to the wildly unpredictable global market. Things change, sometimes overnight. What was a top-dollar option yesterday, a secure place to put hard-earned money for years, can become near worthless today.
Should this discourage investors? Absolutely, positively not. Risk is built into the game just like reward. Refusing to play simply means zero gain, whereas playing smart has the potential to lead to impressive returns.
The key is to have a handle on an investment’s risk versus its reward. While both are inherent to the game they’re almost never equal: understanding the chances you’re taking as much as the fortunes you could make is how investing is done right.
Consider the risk versus reward of these investment options:
Most people new to the stock market enter through binary options. It’s touted as a low-risk versus high-reward form of trading where a fixed price determines an all-or-nothing outcome. Services and apps catering to binary options, like this one called 24option, provide tutorials and assistance to help folks get started. It sounds like a simple form of trading, where results are limited to only two outcomes, but there are still ways in which binary options trading can surprise the unknowing investor. For example, some less-reputable firms will offer to double your investment by adding their own finances, which sounds great except that more times than not the fine print forbids the withdrawing funds until a set value is reached. As with anything, look close before signing.
Making gains by buying and selling precious metals has been an investment strategy for thousands of years. With that kind of track record it’s easy to see why getting behind copper, gold and silver seems like a good idea financially: occasional ups and downs are no match for the enduring value of these metals. However, one constant principle of precious metals investing is that this stuff is only worth what the next person is willing to pay. A newly discovered vein of silver in the Hunan province is enough to take a sizable chunk off the value of silver across the globe for several years. Precious metals trading is fickle and unforgiving without a long-term game plan and diversity.
Real estate investment has a historical record of relative security rivaled only by the precious metals market. The risk of future demand dropping off significantly is fortunately much lower. There are plenty of ways for seemingly safe real estate investments to tank in value, however, and would-be land barons and baronesses have to be aware of what dangers threaten their properties. Changing climate is something more and more property owners and real estate investors have to consider as sea levels rise and average temperatures fluctuate. Natural disasters, a depressed local economy, and money pit scenarios can also play a hand in disintegrating real estate returns.
There seem to be countless ways of investing money in order to see wealth grow. Each one has its proponents spouting about how successful their particular choice can become, but none are willing to showcase the risks. No matter how strong and secure an investment may seem, there are always ways in which the whole thing can come crashing down if investors aren’t careful and cognizant of the risks versus reward ratio of their decisions.