High Risk Investments

When we sit down with our financial planner to create a new portfolio, we may be asked if we would prefer to put our money in high-risk or low risk investments.

If an investment vehicle promises huge rate of return in an instant, then the investment is likely to be risky.

High-risk investments can either under-perform or over-perform. The risks and rewards are not always well-balanced. Here are some investments that could be highly risky.

Leveraged Oil ETFs

Oil exchange-traded funds (ETFs) are one of the major types of commodity ETFs on the market. Receiving a lot of play, oil funds can offer investors either exponential returns or losses.

With oil prices having the tendency to be equally volatile, trading activity can then reflect a higher level of volatility in its prices.

Options

Options can offer high returns for investors trying to time the market. It can allow investors to use significant leverage and take a position with low capital requirements.

Investors with options may acquire a stock or commodity equity within a possible date range. However, options can be risky due to their time conditions on the purchase or sale of securities. Most professional investors are against timing the market.

Initial Public Offerings (IPOs)

Companies have many ways to raise capital, but the most well-known is by issuing a stock to the public. A private company must go public to reach a broader range of investors, and that is where IPOs enter.

IPOs are highly beneficial primarily because of their ability to immediately raise capital by connecting with several investors. At the same time, they are very risky since there is still a high level of doubt as to whether the company will be able to accomplish the required tasks to progress.

Venture Capital

Small businesses with innovative products and services have high growth potential, but they still need a significant amount of money to capitalize on their plans and expand from traditional financing sources.

Venture capital mainly helps a company have a source of financing to support rapid expansion. Investing in it however, can be unpredictable and unclear. Particularly, in management’s ability to accomplish tasks necessary to maintain the business.

Forex Trading

It is better to let the professionals handle this one. Given its fast-changing nature, currency trading and investing usually presents a high-risk environment to sentimental traders and investors.

Forex trading can be significantly beneficial, as it can offer the opportunity to make large profits. The leverage that can be used is substantial and it can come at a very low costs. Still, trading in the forex market can be risky because its margin requirements are not similar to the traditional stock market.

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