A younger investor who has enough time to regain their money in case of loss might want to choose a risky investment portfolio. Most experts agree that a portfolio heavily weighed to stocks is considered riskier than other types.
Explanation:
According to FinancesOnline.org, the most common types of investment instruments that are available to all investors are stocks, bonds, mutual funds, exchange-traded funds, certificates of deposit, and annuities. The investment instruments have different risk profile varying from riskiest, like stocks, to treasury bonds and bills that are considered the safest in the world. The amount of risk might vary within each asset class as well, depending on its specific characteristics.
Though the classical investment portfolio consists of the three mentioned instruments, there are other choices as well. For instance, low-grade junk bonds, penny stocks, playing the options market or speculating on real estate, which are considered higher risk choices.
Usually, younger investors can afford to take a higher risk compared to people near retirement or those who need to pay for college or a house. In case they lose their money, they have more time to recover, while those who invested all their money just before the retirement might face tough times in case their financial strategy proves invalid.
Though the risk level depends on what particular financial vehicles comprise the portfolio. However, there is no such thing as good or bad investment risk, as the amount of it is determined by a personal decision and the degree to which a person relies on their financial instinct.
