Is it risky?

People often ask why type of investment is least risky. What they should be asking is, "How do I invest in a way that isn't risky?" You see, any type of investment can be profitable if you know what you’re doing… or disastrous if you don’t. Risk starts with the investor, because the investor is the one who has to determine if the deal they are looking at is risky or not.

There are lots of investments out there. Often, there are more bad ones than good ones. Can you tell the difference? If not, then investing would be risky...for you...right now. But you can change that by improving your financial education.

Many people consider investing in real estate risky. And it is risky for those who don't know what they're doing. Many flippers bought at high prices during the real estate boom assuming the price would continue skywards. When the bubble popped, they were in big trouble. That's why I buy real estate for cash flow, not appreciation. It's less risky.

I consider investing in mutual funds to be very risky because I don't have control over the investment - I am at the mercy of the market and whatever decisions the fund manager makes. Add to that poor returns and high management fees, and mutual funds are a risky, poor-performing investment.

I'll say it again... Any type of investment can be profitable if you know what you’re doing… or disastrous if you don’t. 

The same idea holds true for stocks, commodities, businesses, real estate - every asset class. So before you jump into an investment, learn the fundamentals of smart investing in that asset type. If you do, you'll be one of the investors who can honestly say, "investing isn't very risky for me."

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Original publish date: April 08, 2010

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