In finance, to invest is just to give up money in order for you to acquire an asset that can or can not produce some additional money (called interest). That being said, the risks that someone faces when investing, are huge.
If Robert wants to invest the $10.000 he inherited, he should have the following questions under consideration:
- How am I protected as an investor?: This is an important question to ask because no one wants to be cheated in the process. So, he has to consider if the bank is supervised by the financial authorities so that he knows if in case of something goes wrong, someone answers and also that everything is legal.
- What guarantees are in place so I make money?: No one is going to assure Robert that he will make money because that is the risky part of investing but if he wants to invest, he needs to be aware of the risks.
- What taxes do I have to pay for this investment?: Big question because if Robert makes money out of the investing, there are some taxes that he needs to report and pay.
- How do the risks compare to the potential gains?: This is one of the first questions that an investor asks to himself because the decision of investing comes from the desire that you want to gain something out of it. So, the investor should be aware of how the risks are compared to the gains in order for him to make the decision.
- What are the chances that the investment fail?: Robert should wonders about this because as I mentioned before, he has to be aware of the risks of an investment before he actually invests.
The other option shouldn't be considered when investing because it doesn't change anything about how much the person can gain or if it is secure to invest.