No risk, no profit, the basic rule of investing
Almost everyone knows that there is a clear relationship between risk and the amount of profit received.
The riskier the trade or the higher the leverage, the greater the profit you can expect at its completion.
The best example of this is the negative bank interest rate on deposits in Swiss banks, where you pay money to ensure that your savings remain safe with the highest possible guarantee.
At the same time, Forex trading with high leverage allows you to earn tens of thousands of percent per year, but carries a huge level of risk.
This is quite difficult to do; it is not for nothing that investment funds have large staffs, while the average profitability of these funds rarely exceeds 30% per annum.
How can you find the golden mean between profit and risk?
Here everything is quite simple and directly depends on the amount of money you have at your disposal.
The easiest way to explain this is with my own example. Just ten years ago, I preferred Forex trading to other types of investments and trading.
This is not surprising, as it is difficult to make a significant profit by investing a couple of thousand dollars, while Forex offers a real chance of earning money with a small amount of funds.
After the amount on the deposit began to increase, the desire to take risks disappeared and part of the money migrated to the stock market.
Over time, free funds appeared, which were used to purchase real estate and open deposits in banks, including in precious metals.
After this, I felt a certain confidence in the future, because now my earnings do not depend solely on the success of Forex trades.
However, if we evaluate the profitability of all investments, a rather interesting picture emerges:
• Funds used in Forex trading make up 4% of all investments – they provide 60% of all profits received
• Money invested in deposits, real estate, precious metals and securities make up the remaining 96% of funds – while they bring in 40% of all profits received.
This clearly shows how much less profitable low-risk investment options are. This isn't surprising, considering that, under favorable circumstances, Forex trading yields over 300% per annum, while my bank deposit yields only 1% per year.
Real estate and precious metals are also not rising in price as quickly as we would like, and things are even more complicated with stock dividends.
Based on my own experience, I can draw a clear conclusion: if you don’t have a lot of money, you’ll definitely have to take risks to earn money.
Alternatively, to avoid using the riskiest strategies, you can increase your deposit using investors' funds. To do this, you need to become a manager. After this, you will have the opportunity to earn money from investors' money with less risk.
Of course, everyone has their own path, and the proposed plan won't work for everyone. But if you're like me and are fairly frugal and plan ahead, you'll definitely succeed
