Thursday, October 21, 2010

What are the Risks of Investing?

We’ve recently spoken about the importance of saving for the big (and small) things you want and need in life, from a new bike, to a college education. Investments can be one way to grow your savings, but there are a lot of risks that you should be aware of before you begin.

Inflation is the increase in the price of products over time. Inflation rates change every year. Right now inflation rates are low. That means that purchasing power is relatively stable, but there is a lot of fear that that will not continue. You want the return on your savings and investments to be higher than the rate of inflation.

Interest rates also vary over time. When interest rates are low, as they are now, stable investments increase in value, but when interest rates rise, the value of these investments fall.

Parents:   As you help your kids learn about investing, help them be aware of the potential risks.  Read What Investment Risks Should I Know About? to learn more.