5 Investments Ranked From Low-risk to High-Risk and How They Work

By jedryccc | OMG - Online Money Guide | 24 Jun 2020

A great way to earn more money is by investing. It's basically using your money to get more money. Things like stocks and mutual funds are some examples that people usually think of in investment. I'll be telling you about five types of investments.

Remember that with every investment, while some might have lower or higher risk will always have risk associated with them. Anything can happen when investing so always remember to be responsible and always research. Not all investments are equal.

In many cases, the low-risk means low reward and high-risk means high reward but the same is true for losses since investing in something risky means you have a higher chance to lose your investment. A great way to invest in high-risk investments is to spread your losses across many investments.

5. Bonds (Low-Risk)

They are essentially loans to a business or a government entity. You are allowing the entity to borrow your capital and give back to you with an interest. Bonds might pay lower than stocks but they are a go to for low-risk investing. You can be issued bonds from a government organization like the U.S. Treasury or a corporation.

4. Mutual Funds (Low-Risk)

A mutual fund is a collection of many investors' money that is used to invest in a number of companies. A professional manager is employed to invest the pool of money on stocks, bonds and other assets to provide a gain. If you do not want to research as much or pick your own stocks, a mutual fund is the way to go since somebody will be doing it for you.

3. Index Funds (Low-Risk)

An index fund is a type of mutual fund that tracks stocks passively according to an index, unlike mutual funds that have a professional manager. An S&P 500 (the 500 largest publicly traded companies in the U.S.) index fund would hold stocks of companies within that index.

2. Stock Market (High-Risk)

Investing in the stock market involves much analysis and has many factors to consider. One can easily lose their money blindly investing in the stock market. Some stocks can be volatile and garner you great losses. Still, it can be rewarding to make gains in the stock market. With research and experience, anyone can be successful in the stock market.

1. Cryptocurrencies(High-Risk)

You might have heard of Bitcoin, the pioneer cryptocurrency which peaked at $20,000 in late-2017. Cryptocurrencies are volatile investments which have great fluctuations in value. These digital currencies are mined and work on a blockchain, a decentralized record of transactions. Today, Bitcoin and other crypto move in price often and many predict their value and usually fail to the extremes. Investing in cryptocurrencies require great knowledge and research.

The Bottom Line

Invest only when you are sure and have done adequate research. Invest in things you know about. Always stay updated and make sure to be aware of investment opportunities. Also beware of investment scams like Ponzi schemes. Investment is not a get-rich-quick method but it is a way to get rich.

Investments will take time and not all of them will give you great returns and some will be losses. No matter what, never give up. With risk comes reward but the reward is not guaranteed. Know your forte and invest to the best of your abilities.

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