Risk-Free Vs High-Risk Investments: What is the right option for you?

financialexpress.com:

Making investment is a difficult decision-making process that can significantly impact your financial future. The choice between risk-free and risky investments is one that demands careful consideration. Some people feel that they need to only get into safe investment options while others feel they would only invest in high-risk funds.

Whether you can take the risk or only invest in safe products entirely depends on your ability to handle it financially and what are your goals. You can diversify your investment depending on your risk appetite, goals and income.

Your investment choices should be tailored to your financial objectives. Short-term goals, such as creating an emergency fund, are best served by risk-free investments. Long-term goals, such as retirement planning or wealth accumulation, may benefit from a combination of both risk-free and risky assets.

It’s important to understand the fundamental differences between these two investment options to achieve your financial goals.

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* Safety

Risk-free investments are often synonymous with safety. These options are characterised by minimal to no risk of losing your principal amount. The most common risk-free investment is a bank fixed deposit or government schemes offering fixed returns. When you deposit money in a bank fixed deposit, your investment is protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC), up to a limit of Rs 5 lakh per account. This makes it an ideal choice for conservative investors who prioritize the security of their funds.

* Low Returns

While risk-free investments offer safety, they typically provide lower returns compared to riskier options. In