Why Some Risk Is Always Good For Your Investments
“In investing, what is comfortable is rarely profitable”.
This statement explains investments in a beautiful manner.
To be successful in investments, you need to venture a little out of your comfort zone. Yes, it is true that you do not always have to invest in high-risk investments that offer a world of uncertainty. But some risk is exactly what you need to reap excellent benefits!
Here is why some risk is good for your investments:
Why should you not be completely risk averse?
There is a certain element of risk in almost all investments. It doesn’t matter even if you invest your money only in a fixed deposit of a bank. Even here, your bank has the risk of going bankrupt and not paying you back. The degree of risk differs from investment to investment.
Usually, the degree of risk is what is proportional to the amount of money you make on your investment. It is up to you to decide how much risk you should take. Taking some risk is always good for an investor!
How do you take some risk while investing?
The first step towards taking risks while investing is to understand risk. Not all risk is bad especially if you can measure it and take a calculated step.
It is also important to understand that risk and volatility are different. Volatility is the fluctuation in rates which just points out to changes and is not a direct sign of risk. It is not necessary to immediately shift your investments the minute you see volatility!
Taking “some” risk does not mean that every investment you make has to be risky. Make wise choices by diversifying your portfolio and making sure some investments are risky and some are safe. This way you stand to gain any benefits from your risky investments. At the same time, you also have safer investments in case your risk goes downhill!
Invest in Different Asset Classes
It is important to invest in different asset classes. This is because not all asset classes react the same way to adverse events. Having a good mix of asset classes can help you protect yourself from risk. At the same time, this mix will ensure that you are not being completely risk-averse.
Invest in Mutual Funds
To take some risks, it is a good idea to invest in mutual funds. This is because mutual funds come with a certain amount of risk and they are well managed by experts. Investing in mutual funds will be an excellent way of taking the right amount of calculated risk!
Taking some risk for your investments is the best thing that you can do. It ensures that you are investing your money in areas that have a potential for good returns!
It is equally important that you monitor your portfolio and not take unnecessary risks that over-expose you to risk.