Risk is part of any investment with some investments involving a higher risk than others. But with that increased exposure comes the possibility of a higher profit. So, let’s look at some financial ventures that offer high returns in exchange for taking a higher risk.
Binary Options
Considered by some as the stock equivalent of gambling, binary options are short-term investments offering large returns if you know what you’re doing. With binary options, you are deciding whether the price at the expiry date, between 30 seconds and one month, finishes higher or lower than the set index. Choosing correctly, you double your investment; lose, and you get nothing back. Your winning percentage depends on the strategy you choose and how well you study the market.
Penny Stocks
Penny stocks sell for less than one dollar, so they look like a good deal. The reason the price is so low though is these stocks are not worth much, many times coming from companies that are in trouble or startups with very little capital thus a low chance of success. Beware of penny stocks because the company may disappear along with your investment.
Emerging Markets
Another popular, risky option is buying stock from companies in emerging foreign markets. The political and financial situations are ever changing, so stability is not great. Without a track record to go on, investors are blind to factors that influence these markets and find it almost impossible to get accurate information from the source. In some cases, these countries lack laws to regulate business transactions.
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IPOs
Investing in an IPO is investing in an unproven company. Although some businesses go on to become giants in the industry, many more fail to off the ground floor. Many of these IPOs end up trading well below their initial offering even five years down the road. Before you decide to invest in an IPO make sure you know as much about the company as possible. Sometimes waiting to invest after the initial period of the IPO expires is the best choice.
Leveraged ETFs
An ETF, or exchange-traded fund, is a security that tracks an index of some type, typically oil prices. The price changes many times throughout the day and what makes them so incredibly risky is these investments do not follow market performance trends. This makes these stocks very hard to forecast. ETFs are popular with day traders because these are short-term investments due to the volatility of the oil and gas market. Profits are high, but many investors walk away with nothing.
Venture Capital
Investing in venture capital might be the riskiest of all options. This is money for startups that may or may not succeed. Many factors play into this investment including management, marketing, and even location. Many startups come from someone with a promising idea but no business experience, so invest carefully.
Investing is always a risk but more you risk, the more you possibly get in return. If the high risk doesn’t scare you, check out these types of investments.
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