Saturday, April 5, 2014

What does high risk high return investments mean?

What does high risk high return investments mean?
High Risk, High Return Explained Investments that have a very high risk tend to pay out a lot more and those that have a low risk have reliable low pay-outs.  For example: A Certificate of Deposit (CD) or a savings account is considered low risk, low return.  If you put your money in one, there will be a low rate of return (interest paid to you), but you will gain money on the investment.  It just won't be a lot.Stocks are usually considered high risk high return because you spend a lot of money without knowing the payout, but if everything goes through you will get a high return (payout) Broken down, you might say that new company has stock priced at $1 per share; if you buy 1 share at $1 and the value increases to $25 over time, you would only make $24.  If you take the same example, but you buy 1000 shares (spending $999 more) and the stock increases to $25, you would make $ 25,000.  A much bigger risk (because the company could have gone bankrupt and you could have lost it all), but worth it to potentially make $24,775 more.

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