- May 27, 2019
- |Finance, Legal Moneylender, Loans, News
- 0
There are several types of investments where you can risk big with the aim of landing a huge fortune. As much as it should be discouraged, such cases can be worth the hassle. With proper analysis to reduce the risk, the returns can be promising.
Tips on minimizing risk.
- Evaluation- draw the possible risks likely to occur if you were to carry out this investment.
- Probability- at this point, we check the likelihood of the risks occurring. What is your percentage of it occurring without proper technique.
- Lessening its chances- This involves the techniques in which you can use to reduce its chances of it occurring.
Examples of these risky profitable investments are:
· Investing in Oil ETFs
An Oil ETF (Exchange Transfer Fund) can be a stock owned by an oil company, bonds or assets. It is an efficient way of investing into this industry without having to dig up oil wells or storing barrels of oil in your basement. Do people store barrels of oil in their basements? That’s for you to find out. Oil ETFs are mostly investments of future contracts, keeping tabs on the prices of the oil too. These future contracts are ties or agreements of buying crude oil later on at a certain date.
Risky side of Oil ETFs
Although Oil ETFs are known to bring lots of fortunes, it can be devastating at times too. Investing in Oil ETFs can be highly risky due to the oil market price. The prices for oil can be highly unpredictable, fluctuating from time to time due to certain factors from their place of origin. These factors could political instability like civil wars or a natural disaster like an earthquake.
More so, an investor has to choose whether he or she will invest in the equity of the company or the future deals. Between the two, the future contracts are the ones which have been the most affected. Most investors who are educated or have done their research well have effectively minimized the risk of losing their bets.
Another risky part of investing in Oil ETFs is a situation known as Contago. A Contago takes place once a future contract is sold for a higher price than what it was initially purchased for. It is a result of companies rolling over these future contracts, putting them on sale and purchasing new ones. This causes the Oil ETFs to consequently lose their value.
Minimizing risk on Oil ETFs
Although oil ETFs come with a lot of risks in investing, an investor should minimize it by carrying out the proper research and keeping an eye on the world news regarding the oil market. All in all, investing in Oil ETFs could be a risk which could earn you a lot or make you lose big because of its shift in prices.
· Startups
Investing early in emerging businesses can be a way to make a lot of money too. These businesses could have a great idea which could be worth the hassle. Moreover, these startups include their ideas in portals for investors to have a view of it. Some would come with explanations on why you as an investor should invest in it while others will leave it out for you to decide.
Some of these new companies choose to avoid going public in the beginning, starting out as private set ups. This becomes a disadvantage to you as an investor as you may fail to sell your shares in the long run. This may lead to you losing your total investments if the startup fails to pick up and perform.
It is wise to have a look at not only the ideas but also the management itself. A startup could begin well but fail to grow because of poor management which would make poor decisions based on it. A good and focused management would surely win you a bigger score.
· Forex
This is a marketplace where the foreign exchange takes place. Trading of currencies is a matter of negotiation between the brokers who later on decide on the value for each one of them.
How do you trade in Forex?
Trading in forex can be based on different factors such as future and current prices of these currencies. Moreover, trading in forex can be narrowed down to tasks such as delivering bought currency to complete the cash settlements. There is also the trade of contracts used as a reference for currencies being exchanged. These contracts could be sold online.
Investing in Forex
Investing in forex is an attainable goal. First, you need to check the legitimacy of a firm and its operations before opening your account with them. This is by checking whether they have registered with the necessary board before they are allowed to conduct their business.
Risky side of investing in forex.
Forex is a special type of marketplace like no other. In most cases, markets are meant to be a platform where both parties gain something out of what they are trading. However, forex is different in its own way as it comes with no guarantees. This is because one party can profit more and the other can lose big. In addition to this, forex lacks a clearing house for their transactions as well.
Another risk in forex investing lies in the firms providing this service. Firms with the trade for their retail contracts may not be under registration. These may lead to investors being pulled into scams resulting in losses. Selling forex contracts to another interested party is a long process which requires the involvement of the firm issuing it.
Profit in forex is realized upon selling at a much higher price compared to the price you purchased it for. In spite of all this, Losses can be due to the fees being deducted from it.
· REITs
REITs which is fully referred to as Real estate investment trusts are also a high risk high return investment. The profit or losses in this area is characterized by the fluctuation in prices in the market. Investors who have REITs with high paying dividends also have the potential risk of losing big.
· High return Bonds
Bonds with high returns can be classified as a high risk high return investments too. They are different from the normal bonds which come with much lower rates thus lower risks. This is also a major point of consideration to have in mind.
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