What makes a risky investment worth it?

Question

Hey guys!
So my question is pretty short and sweet. What makes a risky investment worth it? Is it the ROI? Is the creativity? Is it the person who brought the investment to your attention? In a nutshell, when is it OK to invest in something that looks horrible on paper? Or is there never a time.

Account Closed · Answer

Risk is relative especially when it pertains to real estate.  Some real estate transactions lend themselves to many alternative uses and exit strategies.

Experience, creativity and good connections could turn what many think of as a very risky property into a lucrative deal.  Your own risk may be smaller than the risks of others because you have some exit strategies that perhaps other did not consider.

J Scott · Answer

The big question is what skills, assets, traits, etc do you bring to the table to mitigate the risk that would otherwise be inherent in this investment.

If the answer is none, and unless the upside makes the risk worthwhile, you should probably pass.

Bryan Hancock · Answer

A â€œriskyâ€ investment is â€œworth itâ€ if the risk/reward relationship is sufficient.  Risk is capped by many individuals because they canâ€™t stomach the downside.  That is supposedly why the securities laws limit how promoters can sell â€œriskyâ€ investments.  Accredited investors can participate in these projects because they can afford to lose their entire investment.  The SEC assumes that the Average Joe canâ€™t afford to stomach this risk and enforces legislation to protect Joe.

Generally numbers on paper look rosy so if it looks bad there I would pass every time.