In the world of finance everything comes with a price. With investments, this price is often in the form of the risk associated with that tool. Though even the safest investments carry a certain amount of risk, there are a some investment options that follow the ‘high risk, high reward’ mantra.
If you have a low risk appetite you should stay away from the following 4 investment options.
Initial Public Offerings
Investing in companies whose financial track record has not been established in the public sector is highly risky. Despite all your research before Investing in an IPO, you are still betting on ifs and buts.
High Yield Bonds
Bonds are always risky especially during inflation. Bonds with high yield can reap really good returns, but you risk the loss of your principal amount.
Government bonds usually are very safe investment as they provide low but consistent returns and it is very true in the case of current bonds. But bonds with a high yield are often valued such as they have an equal chance of succeeding and failing.
Derivatives are complicated investments; they are investments that derive value out of an underlying asset. One such type of derivative is called an Option. Options are nothing but security which is valued on the basis of time. If you buy an option today and it isn’t as valued 5 years down the line as it is today then you will lose money by selling it.
The unpredictability of the market and how it will fare in the future is exactly the reason that makes Options a risky investment.
The Forex market is very fast paced. What makes this market more dangerous is the volatility in the currency rates. You need to have a good grip on how particular currencies are performing as they are all linked to one another. Hence, this creates a dangerous environment which can only be handled by experts.
These investments options are risky but at the same time have given outrageous returns to investors. If you have a low risk appetite it’s better to avoid these investment options altogether.
If you’re looking for the safety of your money with higher returns than banks can provide you, you should consider opting for registered and regulated chits like KyePot’s digital chits. A versatile financial tool, it allows you to save money at higher rates of return than bank Fixed Deposits and Recurring Deposits, pays you regular dividends, and provides you the option to borrow money at rates much lower than standard loans.