Any investment strategy must factor in the risk-to-reward ratio. By nature, people are risk-averse. Yet, our appetite for returns is always high. Thus, both the conservative and high-risk investors want to invest in investment vehicles that offer them high returns. High-risk investors are ready to risk more to gain more. Conservative investors also wish to get higher returns but still have a good night’s slumber when they go to bed, assured that their money is safe.
In recent years, low-risk investment vehicles are paying less and fewer returns, frustrating conservative investors. However, it doesn’t have to be so. There exists some highly-profitable investment methods that pay high returns. In this article, we’ll show you five high return investments that you should consider betting your money on. Each investment has an accompanying risk; there’s no sure thing in the investment arena, and analyzing the involved risks is what makes investing an exciting activity.
1High-yield Savings Accounts
Most savings accounts held in traditional financial institutions offer abysmal returns. But stashing your money in high-yielding savings accounts can earn you more in return. Typically, a high-yielding savings account can offer 20 to 25 times more returns than typical savings accounts at brick-and-mortar banks. High-yield savings accounts are often available at online-only banks. For you as an investor, consider different factors, such as the minimum required initial deposit, interest rates, minimum account balance, account fees, if any, availability of your cash, and other factors, before investing your money.
2Certificates of Deposit (CD)
Certificates of deposits also pay higher returns than typical savings accounts. CDs are low-risk and often considered safe investment vehicles. The federal government usually issues CDs, and you will earn interest after a certain period until the end of the cycle on specific maturity dates. CDs lock your cash for a specified period although you can still choose to withdraw before the maturity date. However, this will attract a penalty. CDs can take several months or even years to mature, so shop around to find the most appropriate one that fits your needs. Typically, longer-term CDs offer more interest than short-term CDs.
Real estate investment trusts (REITs) also offer high yields. REITs pool investor money together and plow it in income-generating real estate whether commercial or residential. Although REITs can be risky, they can be directly affected by the economic weather, and they offer high dividends to investors up to 10% to 15% in the right market conditions. Despite the high risk, REITs have outperformed the different indices, including the S&P 500 Index and the rate of inflation over the last 20 years. If you wish to invest in REITs do your due diligence research.
High-yield bonds, also called junk bonds, are often associated with high risk and substantial returns. These bonds can be issued by governments or corporates and have a higher risk than investment-grade bonds. The high return is there to compensate investors for the high risk in loss of principal. High-yield bonds are highly volatile but offer higher returns than typical bonds. Before you decide to plow your money in high-yield bonds, be open to anything because the default risk is high based on such bonds’ past performances.
5Initial Public Offerings
Initial public offerings (IPOs) can also offer an investor a high return. IPOs of low-profile companies with excellent growth potential can be a great opportunity as they are often undervalued before they are listed on stock exchanges. Some IPOs can offer great returns in the short and long run. However, beware that most IPOs fail to generate substantial returns, and there’s often a high risk involved. There’s also great uncertainty involved.
The five high return investment channels include high-yield savings accounts, high-yield bonds, REITs, IPOs, and CDs. As an investor, keep in mind that high risk is synonymous with high return investments. Although you can earn substantial returns from these investment vehicles, do your due diligence. Before you decide to invest in high-return investments, know your willingness to take risks. Seeking advice from financial advisors can also be helpful because there’s no risk-free investment.
About the Author:
Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.