Why are some investments risky?
The biggest risk anyone can take is the risk they don’t realize they are taking.
In 2011, I walked onto a rugby field in Africa on day 1 of a 2 week trip, not realizing I was about to break my collar bone — in a 3rd world country without proper medical treatment — and didn’t see a doctor until I was back in the US weeks later! (another story) I took a risk I didn’t realize I was taking!
All investments have some “unknowns”, right? The key is to UNDERSTAND the risks you are taking.
Buying $AMZN (Amazon stock) right now at $1,823.24 could go down further or up higher (Aug 2019). No one knows for sure. Jeff Bezos (Amazon founder) just sold $1.3b of his own stock this past week and the stock market is getting choppy from the trade war with China and interest rate cuts. See the unknown risk?
Buying a commercial real estate property is a risk because you may or may not find yourself with a building with zero tenants or major roads may be added in a few years from now diverting employers to other hot new areas and you are stuck with a building in a declining part of town. See the unknown risk?
Buying a rental property at the current market price may be a risk because house prices may plunge and/or you may not be good at getting GOOD TENANTS into the property. See the unknown risk?
Investing into equity of a startup company (angel investment), you risk 100% of your investment (sometimes more than 100%) if the founders can’t get along, the market doesn’t respond to their products/services, the company runs out of cash and/or fails and you lose ALL your money. See the unknown risk?
Buying Bitcoin currently at $10,854.91 (Aug 2019) is a risk because it could go up and down (and is VERY VOLATILE). See the unknown risk?
If you are looking for a risk-free investment, then CDs from your local bank can yield ~1.2%, far below inflation. If your returns are that low, you might as well stuff $100 bills in your bed mattress, you aren’t thinking like an investor.