As the great George Antone once said, “If you can cover the downside and let the upside take care of itself, wealth creation is easy.” A savvy investor needs to understand this principle when evaluating investments to minimize their risk and maximize their potential return.
There are many factors that one can consider to assess risk when evaluating an investment opportunity. Reward can be easy to measure, as it is typically stated or promoted quite a bit in connection with a particular investment. Unfortunately, most novice investors tend to immaturely focus on the potential reward alone with rose colored glasses, ignoring the downside risk of a particular investment. This can be dangerous. Instead, one of the main factors that should be considered is whether an investment is secured or unsecured.
- A secured investment is when there is a lien on some underlying collateral. This can make recouping your investment much easier. Generally speaking, the better and more valuable the collateral, the safer your investment will be.
- An unsecured investment means there is no underlying collateral to protect your investment, and you will need to sue in order to collect. This may cause a delay in collecting your funds and introduce an additional expense.
Many people ask me if investing the stock market is unsecured or secured. Investing in stocks is secured; it's just secured to a volatile asset. So ask yourself, would you prefer a secured investment or unsecured investment? It's up to you, there's no wrong answer.
Make a Smart Investment with The Legacy Group
If you are interested in diversifying your portfolio with real estate, the team of investment experts at The Legacy Group can provide the trusted guidance you need to maximize your return. To find out more about our services, contact us online or call (719) 578-8387 today.