The choice isn’t between success and failure; it’s between choosing risk and striving for greatness or risking nothing and being certain of mediocrity. (Keith Ferrazzi)
There is so much enthusiasm baked into earning big over a short period of time. How much can you mostly make off of playing safe all the time? We all have a part of our lives when we believe the hype from within and are willing to take the risk. Though some of them take it up with a lot to lose, most of them come up with thoughts once they know they can handle their loss, and moreover, being optimistic is a skill we have developed ever since the phrase ‘portfolio diversification has come about. All of this mostly pops in once you have made your foundation over steady and safe investments.
So, have you been thinking about high-risk investments? Have you come to understand how rewarding they have been in the last few years? Here are some of the best high-risk investments in the market. It’s time to find which one could be your cup of tea. But before that, let’s brush up on the basics.
What are High-Risk Investments?
A high-risk investment is when the chances of underperformance or when some or all of the investment could be lost, and these chances are higher than average. It can also be a practice of diversification of portfolio meaning; expanding an investment opportunity over the potential for larger returns in the exchange for acceptance of the associated risks. Usually, this is for an investor with a high-risk appetite.
Listed below are some of the investments that are associated with a high level of risk. Most of the high-risk investments come under the classification of an alternative investment, which means they are investing out of the stock market in different products.
P.S: You do not want to fall prey to what a lot of investors do, which is falling for illusionary superiority and optimism bias. It could make you believe that you might succeed in this while many others have failed.
A start-up or new business would raise money for their operations through securities, more like bonds and common shares. If you contribute to one of these, you are an investor who would be hoping to earn interest or participate in the future of the business.
Who is it for?
Anyone can invest in a crowdfunding campaign, but it is up to the investor to protect their own interest by knowing what exemption the company is using to sell the securities. You could mostly lose your entire investment through this, but it could also be like hitting a jackpot where you can earn an immense amount of interest and be part of the growing company.
You can always invest in crypto assets. These investments include blockchain, cryptocurrency funds, and ICOs. Lately, these assets have generated a huge amount of interest from the investors in the market and the financial media. They are at high risk because of their speculative nature.
Who is it for?
These investments have a lot of risks involved, and it also depends on the type of crypto asset. These crypto platforms are mostly not regulated, and they do not have a secondary market. It would sometimes be hard to sell your holdings and track prices. But on the other hand, it has an international scope.
- Foreign Exchange
Foreign exchange, or forex, is exchanged on a global scale in a decentralized market that involves simultaneously purchasing one currency and selling another. It is mainly traded in the over-the-counter market, where brokers and dealers actively negotiate the relative values of different currencies.
Who is it for?
Anyone can invest here with just a trading account. It is also a zero-sum transaction where one party profits and the other loses. Irrespective of experience, investors still tend to fail at it. It is a profit when you sell at a higher price than what you paid for, but at times a trade itself could be profitable. An investor could also lose money through overnight fees, referral fees, and more.
- A Hedge Fund
A hedge fund is a type of investment vehicle that employs sophisticated investing methods and invests in virtually anything. Hedge funds usually do not use the classic ‘buy, hold, sell’ approach but instead use alternative methods such as short selling, leverage, or trading in derivatives on an exchange or over-the-counter market.
Who is it for?
Every hedge fund is unique. A hedge fund could have a liquidity restriction and can withhold you from liquidating your fund, which means they are also more difficult to trade than normal mutual funds. Through this, you would be charged by the fund manager, redemption charges, and more. These funds usually offer their profits yearly and are reinvested in the fund units automatically.
- Venture Capital
A venture capital fund is a pooled investment fund that attempts to invest in private market firms from their inception through their last financing round before exiting (either through a trade sale, IPO, or other). Because many of the firms funded would yield next to nothing, venture capital is seen as a long-term, hazardous investment. The objective is to support one or two investments within a portfolio that returns several times their initial investment while covering all other losses.
Who is it for?
Venture Capital is usually run by a fund manager and larger groups. Through this, you may also have to pay capital gains tax, if any. You will also be charged with management fees, but if the business hits off, you could make a good turnover.
All of this definitely involves more risks than your previous investments. Think about it, investing in an early-stage business does involve risk, liquidity, and so much more. Though risks are a con to these investments, their returns have proven to be highly rewarding over the years. When you have the stomach for these risks, you can try your hand at these highly rewarding but risk-filled investments.