When an investment vehicle offers a high rate of return in a short period of time, investors know this means the investment is risky.
Given enough time, many investments have the potential to double the initial principal amount, but many investors are instead attracted to the lure of high yields in short periods of time despite the possibility of unattractive losses. Here are some high-risk investments that could double your money.
See Also: Risks in Stock Investment
Leveraged Oil ETFs
Leveraged oil ETFs are typically subject to high-volume trading activity and are known for high levels of volatility. For these reasons, the ETFs can offer investors more rapid returns or losses if trades are made due to annoying emotions. The price of oil can be equally volatile, so trading activity reflects an amplified level of volatility in its prices.
Options offer high rewards for investors trying to time the market. An investor who purchases options may purchase a stock or commodity equity at a specified price within a future date range.
This form of investment is particularly risky because it places time requirements on the purchase or sale of securities. Professional investors often discourage the practice of timing the market, and this is why options can be dangerous or worthwhile.
Initial Public Offerings
Some initial public offerings (IPOs) draw a lot of attention that can twist valuations and the judgments professionals offer on short-term returns. Other IPOs are less high-profile and can offer investors a chance to purchase shares, while a company is severely undervalued.
IPOs are risky because despite the efforts make by the company to disclose information to the public to obtain the green light on the IPO by the SEC, there is still a high degree of uncertainty as to whether a company’s management will perform the necessary duties to push the company forward.
The future of startups seeking investment from venture capitalists is particularly unstable and uncertain. Poor management, poor marketing efforts, and even a bad location can put off the success of a new company if a startup’s product is not desirable.
Part of the risk of venture capital is the low transparency in management’s perceived ability to carry out the necessary functions to support the business. Many startups are fueled by great ideas by people who are not business-minded. Venture capital investors need to do additional research to securely assess the viability of a brand new company.
This article will be continued in Part 2. Stay tuned!
See Also: Warning Signs of a Risky Investment
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