A large part of investing is about accepting risk. The ultimate question casual investors face is whether they are willing to take on more risk to increase rewards. When you are investing your money in a high yield savings accounts, you are exposing yourself to only a limited amount of risk. For presumed safety, you are also giving up on big returns. If you want bigger returns for your money, then you will inevitably have to take on more risk. This is largely determined by the personalities of investors. Usually, the risk takers would jump in and take on risk, while the more cautious individuals would prefer to stay put. The decision of whether your investment portfolio can take on more risk should not be settled on a whim. If you think a risky investment might keep you up at night and make you worry constantly, then don’t bother going through with it. You won’t make great investment decisions when you are under excessive amounts of stress.
Your Portfolio is Well Diversified Beyond Stocks
If your portfolio is not entirely composed of penny stocks and there is a healthy balance of different investments, then you are theoretically ready to take on riskier but highly rewarding investments. If you have a steady stream of income, such as from dividends which could quickly cancel out any losses, you can undertake riskier investments without fear, but this is largely theoretical. Most casual investors don’t have well-diversified portfolios with reliable streams of income. In that case, you can take an assessment of how much you are willing to lose for a potential reward. Then research the best penny stocks to buy to further mitigate that risk.
You are Still in Debt
Most investors are simultaneously in debt, mainly thanks to mortgages. If your regular income covers these debts, then you are on safe ground. On the other hand, if you are still struggling to pay down debt, now is not the time to take on risky investments. Paying off debt is one of the best investments you can make in your future, therefore, if you still have student loan debts or car loans looming over your head, focus your attention on getting rid of these first. You can still invest, but you will have to carefully manage the risk. A lost investment could further deepen your debt, which could send your finances into full crisis mode.
You are Young
Are you a young person under 35? If you want to make a risky investment, these are the best years to do so. The idea here is that you are young enough to work for at least another three decades. Therefore, if you do make a bad investment, you can work to make up for the loss, even if it takes a decade. When you are older, over 45 and closing in on retirement, you absolutely cannot risk any type of new debt. The debt may carry on to your retirement, which could wreak havoc on your retirement funds, therefore, any risks you want to take should be done in your younger years.