Some say a fair return on investment is just getting your money back. That is an astute observation. When an investor takes more risks in pursuing higher returns, only to suffer a catastrophic loss of capital, this is considered one of the worst possible outcomes. Investors need to maintain a reasonable standard of success to calculate a satisfactory return on their investment. Any con artist may make you believe they get something extraordinary if you have no idea what to expect. Those who fall for scams are the optimistic kind that thinks they can become rich quickly. Ten thousand dollars invested at 10% for a century would yield one hundred and thirty-eight million dollars.

Speculative Investments

Remember that greater potential rewards come with greater risk, as the first rule of thumb. An excellent illustration of this is penny stocks. Don't fall for that! Legitimate businesses with an issue of shares can be very speculative. As a result of an FDA rule, the value of a small biotech company whose primary mission is to develop the next groundbreaking cure might increase or decrease by as much as 80% in a single day. You may come ahead if you make that move, but you may end up with almost nothing to show. To a lesser extent, this is also true of newly issued IPOs and equities bought primarily for speculation about a possible acquisition.

Stocks And Stock Mutual Funds

And what about the marketplace as a whole, or even just blue chip stocks? The risk involved in buying individual stocks vs. buying an index fund must be understood before any assessment of the potential profits can be made. We use a risk scale from 1 to 5, with 5 being the riskiest option and 1 the safest option. You run the chance of losing everything if you put all your money into a single stock, which puts it in the highest risk category, level five. A stock market index fund is considered a level four risk since it is conceivable to incur losses without completely wiping out one's investment. The risk threshold for assets like savings accounts is set at zero.

Real Estate

You may have heard that investing in real estate may provide a high rate of return. Could it? Yes, if you know what you're doing, of course. Many affluent people earn their first or largest fortune in the real estate market. Like any other investment with the potential of profitable returns, real estate might also be a loss. Even though there are many real estate agents out there trying to make a sale, the market is best suited for seasoned investors who've already spent years, if not decades, studying the industry.

Bitcoin

Cryptocurrencies like bitcoin and others are the current objects of speculative interest. Whether or whether cryptocurrencies like Bitcoin represent the next generation of payment information is a hotly contested topic. Still, any investor knows that when anything climbs as quickly as last year, the danger of losing large amounts surpasses the potential benefits of scoring the big win.

Safe Investments

The only viable choice for earning a return on your money is to put it into safe investments, which may or may not be the best option. Returns on safe investments have historically averaged between 3% and 5%, but current yields are substantially lower (between 0% and 1%) since they are mostly tied to interest rates. Low-risk investments yield less money whenever the interest rates are low. The desire to increase one's financial returns may lead one to choose riskier ventures.

Conclusion

Pursuing excessively high returns, whether in stocks, commodities, mutual funds, estate development, or any other asset type, is a leading cause of financial ruin for inexperienced investors. Potentially attributable to the fact that few laypeople grasp the concept of compounding. Any sustained rise in annual profits, even by a small amount, may profoundly impact your net worth. Ten thousand dollars invested over 10% for a century would yield one hundred and thirty-eight million dollars. At a rate of return of 20%, the very same $10,000 investment yields not just twice as much money—it yields $828.2 billion.