We already know that investment that claims to bring high returns also comes with high risk. Many investments fall into this category. Not only can they double your investment in less time, but they are also one of the sure ways to build wealth.
However, we can’t ignore the fact that high return investment can also land you in deep loss if things go wrong. Hence, investors need to understand their risk tolerance, the financial market, and reasons for investing. If you are willing to jump into the high return bandwagon, here are investment options you should consider.
Forex or currency trading is a good high- return investment option especially for gurus in the game of trading. However, it can be the path to financial losses for sentimental traders or newbies. Although there is a high probability of high returns, the forex market is quite volatile, making it risky.
In forex, you can buy or sell foreign currencies as the value of each country’s currencies vary in relation to each other. You go short in one currency while you go long in another. This offers an exciting opportunity to speculate on currencies exchange rates of countries across the globe.
If all things go well, an investor can make a substantial return with options. The point is, the price of financial assets whether stocks or commodities are always moving. Therefore, options traders can benefit from the market volatility.
Options allow investors to buy or sell an underlying instrument within a specified period at a future date. Options are quite complex and this is part of what makes it risky. However, knowing how options work can help reduce the risk. The time requirements on the purchase and sale of security also contribute to the risks. Beyond that, it is a nice way of generating high returns.
There are high yield bonds that pay high interest rates as compared to municipal or government bonds. These bonds promise higher returns for investors but can also have lower credit ratings which make it risky.
Many bond investments have gained a reputation for safety and have increased significantly in value. However, this doesn’t mean there is still no risk of default or loss. Therefore, investors should check the potential loss against returns before making decisions.
REITs ( Real Estate Investment Trust)
REITs have been known to deliver high return with high dividends income and long term capital appreciation. This makes it an excellent choice for investors looking for passive income and want their gains to compound over time.
However, just like any other investment, REIT also has its risks. Interest rates can go high, market trends and economic downturn, high fluctuations in the real estate market. These and many more are the risks associated with REITs.
To reduce risks, REITs should be publicly traded on major exchanges and not private ones. Moreover, check out if it has a long history of steadily increasing dividend. Don’t be distracted by the current high yielding ones.
This is also one of the investment options that offer high return yields. Being a venture capitalist entails financing a start-up that seems to have higher growth potential. This is done in return for an equity stake and that is why it is considered a high-risk/high-return investment. Venture capitalist generally devotes a significant amount of their wealth in low-risk investments. Then, a small amount of portfolio is given out to venture capital to scoop out significant gain.
As said earlier, venture capital is highly risky. There are millions of businesses being formed every year but many never make it to the second years. This means that the business might fail and investors money can go down the drain.
Even if a startup has the most desirable ideas, poor management, inadequate marketing strategies among others can lead to failure. Hence, before anything, venture capital investors must carry out a thorough investigation before any financial commitment.
Although it has been around for a while, cryptocurrency is all the rage now due to the high potential of returns. It is a great digital investment asset that allows investors to generate income through buying and selling of coins. Bitcoin is the most popular cryptocurrency that was designed with the intent to become the digital international currency.
Mainly, cryptocurrencies are highly volatile and speculative. Sudden changes in market sentiment can lead to unexpected moves in prices. This makes it a high-risk investment.
As it can be deduced, high return investment comes with high risk. However, it can be a sure way to build wealth if done right. Before diving in, investors need to have an understanding of at least the investment basics. Plus, consider their investment goals and how much risks they can bear before taking the plunge.