There is always a risk associated with every investment

Some people might mislead by saying that there is no risk in a particular investment. It cannot be the case. Any investment will come along with risk and the level of risk can vary. Recently I had to attend a meeting along with a few friends about some quick bucks schemes. I was not interested so much but my friends wanted me to attend it and share my opinion on that.

Source

I was patient enough to attend the meeting even though so many things mentioned in the meeting contradicted my thoughts. I don't want to go into more detail on what that meeting was all about. But the speaker continuously said that there were zero risks in that particular investment opportunity. I know for a fact that all investments come with a risk, I did not want to waste my time explaining it to them or by arguing with the speaker.

Determine the risk

If you are investing in something, it is very easy to evaluate how much risk is associated with that investment. There is no harm in investing in something that comes with risk. The only thing that we will have to evaluate is the level of risk we are ready to take. One of my friends used to say that "We have to invest only the money that we are ready to burn".

Source

Whatever be the level of risk but it is always good to have a fund allocated for taking this risk. It is not a good idea to be more dependable on this money for other real-life activities. Some people who take the high risk even consider this as gambling money and never plan anything in their real-life with this money. At the same time, if the returns are good, the money can be used for reinvestment or it can be taken to real life to be used for some other purpose.

Diversification helps in controlling the risk

I wouldn't say for sure that diversification is the best way to handle risks in investment. But I can say for sure that it definitely helps to some extent where we can recover the loss from a different investment. If one investment is not giving us the returns that we expect, diversification helps in compensating for that with a different type of investment. By doing this, we don't have to worry too much about the risks or if some investment fails.

Source

Diversification gives a type of confidence where when people feel lost about investment, they get the confidence to compensate for that loss by getting a profit out of another investment. For people having income streams from different places, they will not find these risks as big stress. Even if something goes wrong, their income stream will not be affected in anyways.

---

---

Posted Using LeoFinance ^Beta