Investing is one part return and one part risk. You need to know some of the basic risks which affect all kinds of investments before you make an investing decision.

1. Don’t risk investing in high guaranteed return products.

Usually, the guarantee is a marketing ploy and what you end up with is peanuts. There is no magic to earning a return and doubling money in a short time frame is fraught with the risk of capital loss. It is misleading to think that just because one person is guaranteeing a return it will happen. Returns through investing are earned over time with compoundingCompounding is the concept of earning return on both your principle investment and your profit. It is a way of calculating return that assumes you pull back your return till yesterday and remain invested so that any change in value... More. You have to be regular and you have to be patient.

2. Don’t risk not investing in your name.

Sounds simple, but is far from it. A lot of well-meaning friends and family can come to you with investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More schemes where they are likely to pool money to invest in a real estate project or some start-up or some multi-level marketing scheme. Your name may not feature anywhere. However, well-intentioned the person is, if and when things go wrong you may even face a complete loss of your capital.

3. Don’t risk investing in unregulated assets.

When you see others around you making tons of returns in unregulated assets, you want a piece of the pie as well. However, keep in mind that the party can end at any time if the Government decides to regulate such assets. Not that the regulation will intentionally drive your returns down, but that your expectation of what this investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More could do for you will be dented dramatically. Moreover, any wrongdoing by intermediaries will not get resolved in unregulated assets.

Risks are an important part of investing which are invisible and often overlooked, don’t make that mistake!

Also read: