High-yield investments usually come with a more significant risk, requiring fast moves and diversification. So far, 2022 is a year for people with strong nerves because of increasing inflation and immense volatility across most investments. Before deciding on investing in building your wealth, first find out your investing risk tolerance.
These are the ten most exciting investment opportunities for those wanting high yields and don’t mind taking significant risks:
1. Options Investing
If you don’t want shares in an asset, then options allow you to hold a leveraged position in it at a lower cost. You purchase the options to profit from a short-term move with a specific date range. Prices in the options market remain unpredictable, but technical analysis can help improve your edge on purchasing or selling options securities. The risk is high because perfect timing requires experience.
2. Futures Contracts
Like options, futures contracts are high-risk investments requiring knowledge and experience. Essentially, speculating with futures contracts means an obligation to buy or sell the investment with underlying positions on purchased contracts. However, futures contracts differ from options because the buyer must buy and the seller sells at a future date at the agreed price. In addition, futures are among the riskiest investments because changes in valuations affect them.
No article on investment opportunities is complete without a mention of digital currencies. Cryptos have become a medium of exchange and investment opportunity for millions of people globally, despite their fluctuating prices. Bitcoin is the largest currency and the best example of how these currencies present excellent yields with huge risks. In 2020, the price of Bitcoin was below $10,000, but it reached a staggering $67,000 late in 2021. Today it has fallen to just above $30,000. However, if you bought your Bitcoin five years ago and held on to it, your gains are still excellent today.
If you like risks, then cryptocurrencies come with several, including not being backed by most governments, which could also decide to ban or regulate them heavily, and they could reach zero worth. Additionally, another risk is extreme volatility since trading determines its price.
4. Trading in Penny Stocks
Buying penny stocks can yield good profits, provided you invest in a good company. However, most penny stocks remain volatile and unpredictable, leading to significant losses. In addition, Penny stocks don’t list on major stock exchanges and typically trade over the counter, known as the OTC market. The problem with penny stocks is that these companies have not proven their ability to endure in the market. In addition, there is little information about their financials, and they have low trading, meaning they are often illiquid.
5. Providing Venture Capital
Investing money into startups by providing venture capital can yield some gems investment-wise, but they remain a risk if the startup fails. One frequent problem is that even if there is a good demand for the startup’s offering, some factors like poor management or marketing can place your investment at risk. Therefore, if you decide you want to become a startup investor, first assess the product’s viability and make sure that you can meet the minimum investment required.
6. Look For Other Alternative Investments
There are several alternative investments that some people feel offer lucrative investment opportunities, including hedge funds, NFTs, artwork, collectibles, and royalty interests in energy leases. However, if you want sound returns, you must carefully research any of these because their value can decrease sharply, and they incur high taxes when sold.
7. High-Yield Bonds
High-yield bonds by companies or governments initially rated or downgraded to below investment grade pay higher interest rates to attract investors. However, the instability of junk bonds comes from the risk of default, meaning a temporary cessation of income in some cases or even a partial or total loss of capital if the company becomes insolvent.
8. Trading In Forex
Currency trading and investing require the proper knowledge and constant monitoring because currency exchange rates fluctuate continuously based on several market factors. Currencies tend to follow specific patterns, but not always, making currency movements challenging to predict. Therefore, forex trading remains a risky investment with the potential for high yields.
9. Leveraged ETFs
Exchange-traded funds are also volatile investments because they rely on leverage. They usually remain linked to an underlying index or other benchmarks like the S&P 500 and move according to their track index. In addition, these funds hold several financial derivatives that can go either way, often at a high cost. These high-risk investments can make you money in a declining market with inverse leveraged ETFs. However, ETFs are short-term investments.
10. Initial Public Offerings (IPOs)
Some IPOs can offer you a great chance to purchase an undervalued share that can increase, sometimes faster than others. But, not all IPOs generate the same returns, especially since you never know how well a company can do. One example was the rave around Snapchat’s offering in 2017, which yielded no returns for investors. On the other hand, when Twilio went public in 2016, its share immediately increased by 90% on day three. Despite the potential for high yields, IPOs remain risky because you don’t know how the new offering will move forward, even though companies disclose information before getting the green light from the SEC.