Picking the right stocks is one of the most important aspects of investing.
However, as a young investor, you have a lot less to worry about – namely retirement and wealth maintenance.
Because preserving your capital has yet to be your first priority (you have plenty of years ahead of you for that), you can take on a greater amount of risk than older people can.
High risk certainly has some negative connotations, especially when you’re talking about your money.
Nevertheless, there are many advantages to dealing with riskier stocks.While higher risk investments do come with a greater chance of loss, they also come with a greater chance of gain.
In other words, these stocks are subject to volatility.
This is in contrast to more stable investments, such as those made in blue chip companies that generally have lower growth potential but also benefit from lower risk.
There is a wide range of riskier investments in the stock market, including small companies with high growth potential or companies in the midst of a turnaround.
Taking a chance on one of these companies can greatly improve the returns you can earn in the market.
However, don’t forget that high-risk stocks live up to their name, so you stand the chance of losing the money that you invested.
If you do, it’s all right – virtually every investor suffers losses from time to time – chalk it up to experience and try again.
While higher risk investments have the potential for higher returns, there’s a difference between a high-risk stock and a bad pick.
An important thing to remember in this case is that a high-risk investment doesn’t necessarily refer to a penny stock.
Investing in penny stocks as an inexperienced investor isn’t just very risky, it’s very ill advised.
It’s best to leave that to people who know what they’re doing.