Posted by Dave on August 3, 2010
A friend of mine just won $6,800 in the lottery. I’m not sure how much was “invested” to achieve this return, but I’m guessing it was significantly less than $6,800. Looking at her lottery win from a retirement-savings perspective, it would be nice if one of my investments were to return that kind of money. The problem with hoping for this kind of return is that these are generally risky investments. I (like most people) hate to lose money.
Like the old lottery commercials say though, “you can’t win if you don’t play” – I’ll never be able to achieve the large gains making safe bets on the stock market. I can expect steady money from dividends (hopefully), but not a significant return that could shorten my working time. So, what are my options to achieve large gains?
- I could utilize a gambling system discussed here, which would perhaps allow me to achieve greater gains for the risk taken.
- I could listen to someone like Jim Cramer or any number of so-called stock prognosticators.
- I could follow the penny-stock spam (those guys can’t be wrong, could they??)
The bottom line is, is that the “Home Run” is likely not going to come from an index or mutual fund (or other less-risky assets), rather it requires some luck and risking a lot of capital (Robert explains what could be described as a “risky” investment in REITs here, that worked out well for him – a similar gamble was taken by Derek Foster which allowed him to accrue enough capital to retire very early). To be able to carry this out, I think an investor has to have a bit of a gambler in them, the ability to assess and accept that the bet they are making in the market is the right one, and the ability to not be crushed if the gamble fails. Although investing in general is a risky endeavour, taking no risk is also risky, as your investment could possibly be eaten up by inflation over time.
Personally, I am not at a point in investing (0% of my household income is currently being invested in the market), but I think that when the time comes, 5-10% of my investments will be made in stocks that would have the potential of increasing significantly. I won’t like it if/when the investments fail, but the opportunity to achieve a high return that would significantly reduce my years to retirement would be something (to me) that is worth the risk.
I’m wondering if other people have a “risky investment” account that they have set aside to attempt to achieve large gains? Do you generally play it safe? Have you been burned by a risky investment in the past?