April 20, 2017

High Risk Investments: Are They Worth It?

This post has been contributed.

Ask any successful investor, and they will all tell you the same thing: reduce your investment risk as much as possible if you want to have a healthy financial future. But if you ask the same people if they have ever taken a significant risk before, you can bet your bottom dollar that all will have taken a punt on a high potential yield that was incredibly risky.

So the big question for investors in the early stages of their investment lives is, are these high-risk strategies worth it in the long term? And, if so, when is the right time to take the plunge? We’re going to take a look at a few different strategies of note and explain when - if at all - you should turn to the higher risk markets.


Initial public offerings

Initial public offerings are known as IPOs and offer a lot of potentials - but a lot of risks. The big reason for that risk is that IPOs tend to garner a lot of attention, and, of course, all that attention tends to create wild valuations that aren’t necessarily good for investors. That said, by avoiding the high-profile IPOs, you can often find the reverse - great little companies with a lot on offer which have been severely undervalued.

Venture capital/angel investment

No business is guaranteed any kind of success, of course, But for those venture capitalists and angel investors that spot a very good idea, the returns can be exhilarating. While it is unlikely you will uncover the next Facebook, plenty of angels and VCs make a lot of good money with good, well-run companies and a sensible exit strategy. One thing to bear in mind is that you should learn to walk away when the time is right or it could be a big mistake.

Penny stocks

Penny stocks are renowned as one of the riskiest strategies in investing terms. And there is a lot of different info on penny stocks online, so make sure you are checking in with a reliable source, as a lot of the advice you read will be of variable quality. That said if you limit your risk by only investing in what you can afford, with a little research and a bit of luck, winning big on penny stocks could be as good for your finances as winning the Lotto.

Foreign emerging markets

The world is a vast place, full of constant change., And when the economy of a particular country starts to grow, it can be an exciting time to look into the emerging marketplace. It’s where big money can be made, dreams are created, and spurts of economic growth create many millionaires on a weekly basis. But it’s also incredibly risky. Extreme growth tends to be something of a bubble that could burst at any moment, and if you do plan on investing in emerging markets, you need to be ready to walk away at a moment’s notice.

There are plenty of risky strategies for investing your money, and the ones mentioned here are just a few of them. But wherever you find risk, you can also find great reward - just be sure never to invest more than you can afford to lose.

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