Options, Margin, and Other Risky Investment Practices
Over long periods of time, the stock market has compounded at an annualized rate of somewhere between 9% and 10%, including dividend reinvestment. That's a fast enough rate to turn ordinary people into millionaires if they invest consistently enough throughout their careers. Of course, few people start investing early enough in their careers to make that path easy. Others want a faster way there or to reach a wealth target beyond that million-dollar threshold.
For them, options, margin, and other risky investment practices offer up the potential for faster returns, albeit with lots of strings and risks attached. Those risks could cause you to lose even more than you invested in total. As a result, they're tools that should only be used if you fully understand the risks and limit your exposure to where they won't run your future if and when things move against you. Read on for some of the basics that you'll be facing if you choose to use them.
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Source Fool.com
