Summary:
A primer on the basics of investing and how risks and rewards play into how investors choose to invest their money.
Investing is the accumulation of some kind of asset in hopes of getting a future return from it, and is an integral source of income for many people. Investing can be carried out in many different, some of which have a low risk and return (term deposits) and some of which have a high risk and return (shares). The safest place to invest money is in a bank account. However, not everybody chooses to do this, but instead there are many people who are willing to accept a greater risk of losing money when they are investing. These 'risky' investment options include investing in the share market, and the property market.
There are many various reasons why people opt for the riskier investment options of saving money. One reason is that, though bank accounts may be safe, it takes a long time to earn a reasonable return on your investment, as interest rates generally tend to be small. Also, the monthly fees, associated with having a bank account, often happen to be greater than the actual money made on the investment in that month. However, in investment areas such as shares, a lot of money can be made quite quickly in comparison. Investing in shares is generally appropriate for short term goals, but they still give very good returns in the long term. Even though the risk of losing money is high, if share market research is carried out thoroughly and the right shares are invested in, a very high return is likely.
Another reason why people choose to invest in the riskier investment options may have to do with the time limit they have set to earn money from investments. For example, if someone wants to have a long-term investment for around 20 years, they might either invest in a bank or the property market. While saving money for 20 years in a bank could earn you a more than reasonable return, investing in the property market for 20 years will earn you an even better return. For example, if you buy a normal family house in the Carlingford area for around $500,000, the house would be worth more than $1,000,000 in 20 years time. This will be a return of over $500,000, which will be a great deal more than what you would earn investing in a bank account. On the top of that you will also receive income from rent (if you choose to rent it out). A rent of around $300 per week for 20 years would give you $208,000 in income. However, this type of investment can be risky as house prices can fluctuate, and you may have to pay money to maintain the house.
People these days, are more willing to go for riskier investment options rather than investing money in a bank because of the incentive of making much more money in a short period of time. This factor is what motivates people to accept a greater risk while investing.
This is the complete article, containing 496 words
(approx. 2 pages at 300 words per page).
