Some people consider just about any type of investment “risky.” While that philosophy might seem a little out there, the reality is that every investment does have elements of risk, even U.S. Treasury bonds. It is commonly accepted in the investment world, that investments with potential for higher returns, also will have higher risk. The basic tenant of a balanced portfolio (to mitigate risks and returns that are suitable to needs) is based on this common fact. But when does the line get crossed where an investment can no longer be classified as an investment?
The line is blurred in many areas of investing. Long shots that pay off big do happen. There are IPOs that make people rich, penny stocks that take off and many other risky investments that net investors lots of money. You can mitigate many risk factors with careful research and some prudency, however, risky investments will always have significant risks – no matter how much research you do. This article is going to focus on a single aspect of a very niche style of making money: Binary Options investing.
While it may seem complex, the investment is actually fairly simple. Basically you place a wager on what the price of a stock, commodity, or currency pairing will do over a certain period of time. Now that might sound like an investment, however, keep in mind that the time frame in question ranges from 30 seconds to 5 minutes. Now you can probably start to see how this sounds an awful lot like a new Wall Street game you might find in a Vegas casino.
There is no amount of research in the world that can predict the movements of stocks, currencies, etc. over such a short time period. Furthermore, when you add in the broker fee on these bets, you have to get it right 55% – 60% of the time in order to break even. It’s possible that your odds at the craps table are better than they are with binary options.
One of the major issues with this form of investing is that it has nearly no regulation. Since you aren’t actually buying or selling stock, there is no agency overseeing the transactions. The claim to safety is that you cannot lose more than you risk (unlike commodities and currency) so it is portrayed as a safe way to speculate. I suppose the casinos could make the same argument. Should we start calling gambling a form of investing too?
Sure the glamor of huge return potential is attractive with many investment opportunities. But if the so called “investment” requires no research, no market knowledge and does not even involve buying, selling or trading anything, it shouldn’t be classified as an investment.
A more appealing high risk, high reward investment is the Forex market. It is risky, and it does have a learning curve, but it can provide investors looking for a big payday that opportunity, with lower risks – if done properly – than something like binary options. A good place to learn about true Forex trading is http://www.alpari.co.uk/ . They not only host widely used platforms – from there you can find tutorials, videos and resource guides that offer insight into what is required to invest in these markets, as opposed to placing wagers on a number on a ticker tape a minute or two in the future.