Answer:
No one likes losing money, but unfortunately losing money in the stock market happens to every investor. Lately, there are many people who have lost big, in some cases losing all of their retirement money. It is no wonder that people are weary of putting their money into the stock market. Fortunately, you have some options when it comes to investing that allows you to choose the approximate amount of risk you are willing to assume. The thing that you need to know about high risk versus low risk stocks is that the lower your risk is the lower your return is likely to be and the higher your assumed risk is, the higher the potential for a larger gain. I use words like "likely" and "potential" because there is always the possibility that a stock can perform in an unexpected way. There are very few sure bets when it comes to investing.

High risk stocks are generally considered "long-shots." Meaning that these stocks are connected to businesses that people really aren't so sure about when it comes to potential for growth and market longevity. These stocks are generally less expensive because there is not a lot of demand for them. If you are lucky, you will invest in a long-shot stock and the business it is connected to takes everyone by surprise by performing extraordinarily well and increasing in value. All of a sudden you have made money. Not all high risk stocks are initially low in value. Some of the most expensive stocks can also be some of the most risky, because you have more to lose. The key to having a healthy amount of lucrative stocks is knowing when your potential risk with certain stocks is getting too great and making the decision to either continue holding on to the stock or selling it. Knowing when to buy and sell stocks is what investing is all about. With so many strategies and techniques out there for buying and selling stock, it's no wonder that sometimes people feel lost investing on their own. This is why hiring someone else to take care of watching the market for you is such a popular choice.

If you want to play it safe with your investments, you may want to avoid the stock market all together and choose to invest in government funds instead. Government backed investments like certificates of deposit and mutual funds have a guaranteed return in the form of a percentage of your investment that is then compounded usually on a monthly basis. The down side to being a safe investor is that you are unlikely to see any kind of substantial return. Your investments will grow steadily, but at a very slow pace. Most people do not have time to wait for their low risk investments to match up with the performance of stock investments.

So, to appease both the risky and the safe sides of the investor, most people choose to divide high risk investments and low risk investments. This way you get the best of both worlds. Generally, you decide how to allocate your risk based on how much time you have to invest. Younger people can afford to take more investment risks because, over time, the market does consistently yield an increase. Older people, who may need to access their investments for retirement in the near future, play it safer with their stock investments because they cannot afford to make a bad investment and lose what money they have.