What Are Risky Stocks or Bonds?

by Michael Madson

Overview

Let's start with the basic definitions: Stocks are part-ownership in a business and a cut of the profits. Bonds are money lent to businesses, governments or other organizations. Risk generally refers to the probability of losing part or all of your money. Risky stocks or bonds, then, have a high probability of losing money. But there's more to know.
Types

Brokers recognize more than 10 types of risk. For example, in addition to financial risks, stocks and bond have business risks, credit risks, inflation risks and interest rate risks.

Time Frame

The stock market weathers ups and downs, so the value of your stocks and bonds will fluctuate over time.
Benefits

Risky stocks and bonds can funnel more money into your wallet. In general, the higher the risk, the higher the potential payoff.
Warning

In some cases, risky stocks and bonds yield low returns or lose all the money invested in them. Carefully consider the risks before making an investment.
Considerations

Diversification, or spreading your money across multiple investments, helps balance risky stocks and bonds.
Expert Insight

According to Franklin Templeton Investments (2009), new investors must learn to keep their fear and greed in check. Otherwise, they will develop unrealistic expectations.