Factors to Consider Before Making Risky Investments
Invest your money right and your overall risk should be minimal. However, there are reasons for riskier investments. Maybe you want to expand your alternatives, for example. Whatever your reason, consider these factors in advance.
In The Simple Dollar, Trent Hamm specifically talks about investing in collectibles. Any kind of collecting is likely to be a risky investment, simply because the market for any particular item can be volatile.
But there are good reasons why people choose to invest in things like baby hats, baseball cards, or even gold coins. First, they may enjoy collecting these things as a hobby. Plus, returning these items can be incredibly tempting.
But before embarking on any risky investments, there are some important factors you should consider. Hamm gives some serious advice:
do not invest what you are not comfortable with completely losing. If the loss of the money that you have invested creates any financial difficulties for you, do not invest … It must be money that, if it disappeared completely, would not upset your life …
do not invest more than 10% of the total investment in anything risky. Thus, if you suffer a total loss, your total investment will drop by a maximum of 10%.
never, never invest in something risky if you plan on just buying and holding. This type of investment only really works if you buy and sell due to the constant changes in the market. Is a baseball player dying or inducted into the Hall of Fame? It’s a good time to sell their card … Economic news pointing to a spike in future inflation? You can buy some gold.
As with any investment, this needs to be thought about. Consider the solution from several different angles and then do what works for you. Hamm offers more tips at the link below.
Some Thoughts on Risky Investments | Simple dollar