As a personal finance advocate, being asked about investments and investing is a daily occurrence to me. I often joke that every question relating money has already been asked of me. Building wealth is a preoccupation of many, and investing one’s money is a crucial endeavor to wealth building.
Investing is the act of committing money and expecting it to grow in value. However, investing will always entail risks which means there will always be the possibility of loss of money. In investing, one needs to understand and accept the risk-return relationship: high returns entail taking high risks while low risks will result to low returns. In other words, your returns or growth will depend on your willingness to take on higher risks. Risk can be categorized as low, moderate, high or speculative.
Speculative investing has been popular among many nowadays because of the desire to grow their money quickly. Personally, I am not against it, but I want to emphasize the dangers of speculative investing. One of today’s most popular form of speculative investing is cryptocurrency (i.e. bitcoins) but there are many other speculative investments out there. To simplify, speculative investments are easy to identify by looking at its potential yield or gain. Investments that can give you very high returns like 30 percent or even 1,000 percent in a year is definitely a speculative one. In 2011, the value of one bitcoin was only $0.0008 and someone paid 10,000 bitcoins just to purchase…