What has drawn you to investing? Maybe it’s the raging stock market of the 1990s. Or maybe you’re enticed by the idea that you can put your money to work for you by investing it. Although the benefits of investing are often made clear in success story after success story in advertisements, magazines, newspapers, and online Web sites devoted to investing, it’s important to remember that there is no gain without potential pain. That means that when you invest your money, you can lose part or all of it.
Actually, rewards and risks are usually closely related. The greater an investment’s potential for reward, the greater the potential for risk and actual loss. The high-flying stock that earned a 100% return last month is probably the very same stock that will tumble (and tumble hard) in the months and years ahead. The same goes for bonds and mutual funds and, potentially, even real estate.
You must take on some risk in order to reap the benefits of investing. That’s the bad news. The good news is that sometimes, over time, a decent investment may bounce back and make investors whole again.
Actually, rewards and risks are usually closely related. The greater an investment’s potential for reward, the greater the potential for risk and actual loss. The high-flying stock that earned a 100% return last month is probably the very same stock that will tumble (and tumble hard) in the months and years ahead. The same goes for bonds and mutual funds and, potentially, even real estate.
You must take on some risk in order to reap the benefits of investing. That’s the bad news. The good news is that sometimes, over time, a decent investment may bounce back and make investors whole again.
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