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The risks of buying goods on credit, such as using a credit card, are that a person's debt burden increases. As long as the amount owed is easily paid based on a persons monthly income, then there is no problem. It can become a problem if the individual loses their job. Then how will monthy payments be made becomes the question. The end result will be a bad credit rating unless suitable arrangements are made with the credit card company.
Buying stocks and bonds on margin is risky if the transaction is not closed out before the stock, for example goes into a steep decline. For example, if a stock is selling at $100 per share is purchased on 50% margin, the other 50% is lent to the buyer from the brokerage firm. That $50 per share draws interest. No one can borrow without paying interest to the lender.
In this example, here is the risk element. If the stock bought at $100 per share drops quickly to $25 per share and the investor decides it must be sold, the net amount to the investor is a $75 loss per share. The investor already owes the brokerage firm $50 plus interest. The net of $25 means the investor has lost $50 of his or her own money and must also pay the stock broker another $50 plus interest which was the amount loaned.
In the investor's account is $25. The investor has lost his or her $25 plus the $50 of the stock broker.
Now there is a debt of $50 the investor must pay to the broker, plus interest.
The bottom line is that a huge loss has been incurred by the investor.
Wiki User
∙ 7y ago
Wiki User
∙ 15y agoYou never see the money again. Or the person never pays it back, even if they gain thousands.
"Always get it in writing" Quote from a random laywer.
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The risk of the money market mutual fund is slightly greater than that of the CD
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You can buy bonds from the government or you invest in the stock market. Pick some specific stocks that you like and based on your risk level. Many stocks also pay dividends so you can make more money off of your stocks.
What are junk stocks?
Junk stocks or Penny stocks are stocks of companies that are relatively new or very small. These companies are not fundamentally sound and do not follow efficient management practices. The chances of these companies posting good results and profits is low but since the price of these stocks are very low some people with heavy risk appetite invest in them. Since the chances of making money by investing in these low value stocks they are called junk stocks or penny stocks.
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Investment in high risk stocks is a potentially lucrative and dangerous undertaking. These volatile, "high flyer" stocks move up and down the market dramatically. Examples of such stocks currently include CARBO Ceramics and Priceline.
