What do you invest in? If you are looking for the potential for higher returns on your investment, medium or high-risk mutual funds might be for you. These mutual funds invest in more volatile companies and markets that have a chance for a good return, much more than the five percent of most low-risk funds or other investments. However, with the opportunity for a good return comes risk. You might make a lot of money. Then again, your investments might actually lose money in the long term.
A higher-risk fund will spread your risk around by investing in many different stocks from many different companies. Overall, these funds pose less of a risk to your investment dollars than investing in a single stock from one of these companies, because your risk is spread over many different investments.
Dollar-cost averaging is very important when you invest in these higher-risk investments. Put some money into them every month and you will reap the benefits when mutual fund costs are low. If you buy once when the funds are worth a lot and then they drop, you may end up with less money than you invested.
The other factor with higher-risk investments is time. If you’re in for the long haul, you don’t need to worry as much about the mutual fund market in a single year. You just continue to invest. Then when you want to remove the funds, you plan for a few years to ensure that you can remove them when the mutual funds are doing well.
Higher-risk funds are not for those who panic when their funds go down during a certain month. However, if you have a relatively long time frame and don’t mind some risk, you can reap the rewards in interest if all goes well. There is still that important word, though – if!