High-return investments are synonymous with high risk. Taking the chance on high returns also means you could easily lose most, if not all, of your invested money.
It’s important to match your risk profile with the company and product you’re considering. Investment options are truly limitless, and it can be difficult to figure out where to put your money. A comprehensive risk and goal assessment can help you narrow your options.
To get you started, Benzinga’s put together a list of 10 high-return investments — with low, medium and high-risk options you can review.
3 Low-Risk Investments
Ready to tackle some low-risk investments? Here are 3 great options.
U.S. Savings Bonds
U.S. savings bonds are one of the lowest risk investment types. These securities are issued by the U.S. Treasury and you provide a loan to help the government fund operations. Savings bonds offer a fixed interest rate paid by the government over a specific period of time.
Savings bonds come in 2 types:
- Series EE Bonds earn a fixed interest rate for up to 30 years. This interest is set biannually, so you know how much interest the bonds will accrue over the lifetime before you buy. These securities are sold at face value, so a $100 investment nets you a $100 U.S. savings bond. Series EE bonds are long-term investments, and you will be penalized for redeeming them early.
- Series I Bonds earn interest based on a combination of the inflation rate and fixed rate. A fixed rate is set once you buy the bonds while the inflation rate is adjusted every 6 months. Cashing out Series I bonds before their 5-year maturity period results in a penalty.
A savings account is among the few safe investments with high returns — you can earn interest for every dollar stashed outside bonds and stocks. Unlike other investment options, savings accounts are incredibly liquid, so you can access your cash when you need it.
Certificates of Deposit (CDs)
Certificates of deposits (CDs) are a great low-risk, long-term investment option. A CD account is available at your credit union or bank, and just like a savings account, you can earn interest on money deposited. You’ll earn an interest rate premium in exchange for leaving your deposit untouched for a set period — this could be 6 months or 5 years. Long-term CD accounts pay more than shorter-term ones. If you cash out before the maturity date, you will pay an early withdrawal penalty.
4 Medium Risk Investments
Look into some medium-risk investments if you want higher returns.
Invest in High Dividend Stocks
Dividends are a form of profit-sharing through which a corporation makes regular payments to its shareholders. The payment of dividends isn’t required by law, but corporations choose to pay stockholders a share of the money earned through a reinvestment plan or as a cash option.
High-dividend stock investing can be risky if you don’t know what to look for. Always consider large corporations with a long history of low volatility and financial stability. This means it probably has enough capital stored to deal with market fluctuations.
After identifying a dividend-paying stock, you can buy directly through the company or through a brokerage. Buying directly through the company requires you to make a minimum investment of $25 to $500. A brokerage requires no minimum investment amount.
TradeStation, E*TRADE and TD Ameritrade are great brokerages for high dividend stock investing. All charge no commissions on trades.
Invest in REITs
Real Estate Investment Trusts (REITs) are the best way to spend money in the real estate market without investing thousands as a property owner. A REIT not only provides above-average dividends but also gives solid returns over time as property values rise.
Start with research for REITs that purchase property in an area of interest. Most REITs are registered with the SEC and listed on public exchanges. These are referred to as publicly-traded REITs. Private REITs are exempt from SEC registration and aren’t listed on public exchanges. Diversyfund is an excellent private REIT to help you build a diversified portfolio while you hedge against market volatility.
Invest in Crowdfunding Real Estate
Real estate crowdfunding allows you to pool your money together to invest in properties. When a developer identifies an investment opportunity, he or she might not have the ability to fund the investment entirely, so contribute some capital to execute your plan. You don’t need a large amount of money to join a crowdfunding scheme. Should the company go public through an IPO, there may be a huge potential for investment gains.
Crowdfunding real estate has 3 players — a sponsor who identifies, plans and oversees the entire investment, a crowdfunding platform where the sponsor rallies investors and capital and an investor who contributes capital in exchange for a portion of profits accrued by the deal.
Invest in Corporate Bonds
Corporate bonds provide a predictable financial benefit without sophisticated strategies. They are issued by large corporations to fund capital investments and business expansions. When you buy corporate bonds, you lend out money to the issuing company. The company then makes a legal commitment to pay interest on your initial capital and refund the principal upon maturity of the bonds.
Corporate bonds offer higher returns than government bonds of CDs, and you can maintain your principal while earning a steady income. They give you the ability to invest in multiple sectors with the flexibility to cash out before maturity.
To buy corporate bonds, you need to set up a brokerage account. TradeStation, E*TRADE and TD Ameritrade are our favorites, but you can choose any other from our list of online brokerages.
3 High-Risk Investments
Like to live life on the edge? Tap into these high-risk investments to get the results you want.
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Invest in Forex
You invest in forex when you buy and sell different currencies. Countries issue their own currencies, and the value of each currency varies in relation to every other country. You should select a reputable broker to reduce the risk of fraud. FOREX.com is a great option — it’s the largest forex broker in the U.S. and is strictly monitored by the CFTC and NFA regulatory agencies.
Understand all the risks and trends associated with currency trading. Take a look at how to trade forex.
Invest in Options
Options trading isn’t entirely different from stock trading. An option is a contract to sell or buy a stock at a pre-agreed price and by a specific date. In options trading, you must decide:
- How low or high the stock price will move from its current price
- Which direction the stock will move
- How the stock will move during a specific period
Options contracts are based on various underlying securities, and you can place different types of orders, making them a more versatile investment option than stocks. Options trading is complicated and risky, so you need to work with the best brokers for options traders.
Invest in Penny Stocks
Penny stocks trade at $5 or less per share. These companies usually have a poor or nonexistent financial history. These stocks are a great option if you want to own many shares due to their low price. Prices are highly volatile, so you must be patient and risk-tolerant to reap big.
Penny stock investing is highly speculative — there’s a high-risk and high-reward balance — and it’s often tied to small-cap markets. Due to this nature, penny stocks are not available on the big stock exchanges like NASDAQ and NYSE.
You need a brokerage to invest in penny stocks — TradeStation, E*TRADE and TD Ameritrade are Benzinga’s top picks.
Frequently Asked Questions
How do I determine my risk tolerance?
How do I determine my risk tolerance?
It’s a good idea to know how much risk you’re willing to take and which types of risk most worry you. Your risk tolerance (how much you’re willing take on to achieve potentially greater rewards) depends on a combination of factors, including but not limited to, your investment goals and experience, length of time you have to invest, other financial resources and your “fear factor.”
How do I generate the highest returns in my portfolio?
How do I generate the highest returns in my portfolio?
Understanding and managing portfolio risk is one of the most important ways to effectively manage your portfolio. Quantifying risk in your portfolio allows you to optimize your potential returns. When you do that, you can allocate more capital can be to riskier assets that generate the highest returns.
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