What Makes A Risky Investment A Good Investment – Guest Post
Investing has a purpose – and any investor will tell you it is not only the high of winning; it’s the cash return that makes it all worthwhile. For all of the research, risks and nail biting that goes on in high risk investing, the rewards are priceless.
But how do you get involved in high risk investing, and what makes it worth the risk of possibly losing a good portion of your portfolio in one fail swoop?
The answer to that question, from top investors, is capital. You need to build up capital and have a pretty substantial portfolio before jumping into the high-risk game.
Business Week says it’s “those with stamina and cut-throat attitude risky investments require. It’s where the game gets exciting and where the big plays come from.”
But what are some high-risk investments, you ask? They include real estate, land, mutual funds, EFT, stocks, leveraged funds and more… and the higher the risk the higher the profit.
Something that is always been a somewhat safe investment is real estate, whether it is raw land, a home or even a building. Even if the so-called ‘real estate’ bubble pops, history proves that it will return to a good market value, at some point. This could take years though, so investing in property is a longer-term investment, however the pay off can be bigger than most investments available.
For example, a friend bought a distressed home in a nice neighborhood that was bank owned. The bank sold it for the amount it was mortgaged for, which in a good market was $150,000 below market value. This friend spent $10 grand in down payment and repairs, and in 2 years made $140,000 by holding onto it until the market values came back up. He rented the home in the interim, and had only the repairs and initial investment – out of pocket. Yes, it took 2 years, but can you imagine if you ‘flipped’ 3 -5 homes a year such as this?
Yes, real estate is always a good bet.
These investments can be quite rewarding, and exciting as well as you are literally investing in companies or developments in foreign markets such as Mexico and other underdeveloped countries, that seek investment money to promote growth and well being of that company, or state.
In order to lure investors to their funds, rates can range up to 52 percent growth for the investment because of the volatile investment. Sometimes unheard of profits, but remember, there are high risks as well.
Emerging funds have become the most popular for investors over the past few years.
Using a highly experienced market strategist or broker can help curb the anxiety in these higher risk investments, as well as heavy research on the previous few years in the market you plan to invest.
Hedge funds are simply a mutual fund that isn’t regulated by any governmental agency. It is high stakes, and covers all scopes of investments such as commodities, real estate, and public company buyouts.
Goldman Sachs is one of the biggest investors in hedge funds, and has experienced over 33 percent returns on their investor’s money.
These funds are much riskier than mutual funds, but the returns are enormous, due to quick turn around and the ability to move assets from one fund to another with high-speed. This can really rack up the cash, but it can be just as easily lost should a bad investment happen.
Exchange traded funds (EFT) is a favorite of high risk investors because of the convenience of index investing, lower costs, individual stock ownership and the diversification of the funds.
They have foreign indexes and allow commitments to foreign companies under an umbrella, which is perfect for the person who believes in biotechnology, but can’t commit to just one company.
They include bonds, REIT’s and represent nearly all segments of the market, in the world, pretty similar to the index mutual fund markets.
Foreign exchange currency markets have increased in the past few years, and if you plan to invest in this higher risk market, you should really understand the market.
This is an investment strategy that is known as ‘high risk’ because it is so volatile. It involves investing in foreign currency, and should be highly researched before investing, however, it is also highly lucrative.
AVAFX has a practice online trading account in which they give a virtual $100,000 to play with. This is only a free practice, but can give you an idea of how quickly this currency investing moves, and how rapid profits and loss can occur.
A link to more detailed information about foreign exchange markets can be found here: Trading Forex: What Investors Need to Know.
The best advice to any investor is to spread out, never invest more than ½ of your capital, and don’t invest anything you aren’t ready to lose. Good luck and please, see the Investor’s clearinghouse message below with regard to the current economic situation.
A message from the Investors Clearinghouse: “With recent market fluctuations and the overall downturn in the economy, it can be tempting to invest in something that offers a high rate of return. But investors need to make sure they are investing in a legitimate financial product and that they understand the level of risk they are undertaking. If they are offered a high return with low or no risk, it’s likely a scam. The Alliance for Investor Education wants to help Americans spot bogus investments and conduct the due diligence required when it comes to legitimate high-risk investments.”
Ally is part of the team that manages personal finance guides in Sydney, Australia, which provide tips about Budgeting Worksheet and How to Save Money Fast. Before joining BS & HSTM, she was a Media Planner in McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi’s 501 “Live Unbuttoned” global campaign.