E 5 Tips On How To Avoid Risky Investments

All investments involve some level of risk, however those who are unfamiliar with investing often get roped into risky investments in which they end up losing money. Investments can be tricky, especially if you are new at investing.

Luckily if you learn how to spot a risky investment from the get-go, you have a greater chance of finding the best ways to invest money. Here are a few ways to know if an investment is worth your money or not.

1. What Is the Promised Return?

The first clue that an investment is too good to be true is an extremely high rate of return. An average return on investment for a security such as a stock or mutual fund is 8 percent. Therefore, if you are promised returns of 30 percent or more, it could be a sign that the investment is a bogus one. When looking into an investment that promises a high return, you really want to look into the logic and claims behind these promises. Most likely, the logic is flawed, and you won’t ever get that high of a returned. Just make sure you ask questions when it comes to returns that are promised.

2. How Much Are You Being Asked to Give?

Anyone who asks you to cash out your life savings or take a second mortgage on your home is likely trying to defraud you. An investor should never be pressured to contribute more than they can afford to. If you’re just starting out with investments, start small. This will allow you to get the hang of things, and then you can start investing more once you have figured out what makes an investment promising, and what makes it fishy. No matter how good it sounds, there are some amounts of money that are just too risky to invest.

3. How Often Does the Investment Pay Out?

Will you see a check once a month, once a year, or as one lump sum? Figure out how often you will see your money before deciding to invest. The more access that you have to your money, the better the chances are that you are making a good investment. This is another time that it’s important to ask questions. If you can get a set schedule of when you’ll be paid, that makes the investment more legitimate. If they can’t tell you when you’ll be paid, that’s probably not a good sign.

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