Savings becomes investment only because of risk. Risk is an inherent part of any investment activity. Some of the risks associated with an investment are:
- Loss of capital.
- Delay in repayment of capital.
- Non-payment of interest.
- Variability of returns.
Different investment products have various risks.
Government securities and bank fixed deposits have a high safety and thus negligible risk. Shares, on the other hand, have an increased risk. It can give profit and, at the same time, has the potential to erode the capital to almost zero. Risk and return are directly related.
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