In today’s topsy-turvy world of investments, many people don’t know where to begin. From safe and relatively low-yield investment options to riskier strategies that may pay out more, determining what exact level of risk and yield is right for you can be challenging.
Ultimately, many financial experts and professionals generally recommend that risk needs to be reduced as one ages, in order to prevent a wipe-out of potential retirement or investment income. For those who are younger or those able to take on more risk, high-yield investment options are available.
With that being said, which type of investments can potentially produce the best returns on investment? Today, we’ll examine several types of investments that could possibly deliver big returns for you on an annual basis.
With great reward comes great risk. This is the risk-reward of investments. Many investors have made risky bets over the past decade and have been rewarded substantially. One area in which this couldn’t be truer is in the world of cryptocurrency.
With currencies such as Bitcoin rapidly gaining in popularity among people and legitimacy among financial institutions, a new investment industry has arisen to help people make smart decisions.
The amount that can potentially be reaped is immense. Imagine, those who invested in Bitcoin in 2009, for instance, have enjoyed an average annualized ROI of 370%. However, it is a very risky investment strategy when dealing in the short-term. Most cryptocurrency investors who have earned big have made commitments to hold regardless of fluctuation, waiting potentially years before seeing huge returns.
Considered as the largest financial market with over 5 trillion dollars in daily transactions, the foreign exchange market or FOREX is definitely one of the investments which provide one of the best ROI.
However, just with other investments providing high return, it comes with risk. Just as easy to earn a lot, you could also stand to lose a lot.
In the history of investments, stock market usually provides one of the highest returns. This is definitely more stable as compared to cryptocurrencies as you have a solid foundation behind the price of a stock which is the company behind it and its earnings. In fact, Warren Buffett became one of the world’s richest person by investing in different stocks of companies since he was 11 years old.
Take a look at the Philippine Stock Exchange historical return below. As the Philippine economy improves, so does the earnings of the companies and thus, the increase in stock prices.
Commonly known as P2P lending or microlending, this investment strategy popped up around 10 years ago and has only grown in popularity. Peer-to-peer lending is a solution that connects deserving borrowers with capable lenders, often facilitating loans in settings where banks might not be willing to venture.
Some common examples of P2P lending include microloans to entrepreneurs in foreign countries or small loans for start-ups that can’t otherwise raise the capital. Because this form of lending usually involves making a large number of small contributions, risk is minimized and spread out over many different loans. This investment strategy can earn 10% or more per year when done properly through the power of compounding (see how much you can expect to earn with this interest rate calculator.)
Last but not least, no list of potentially awesome ROI-delivering strategies would be complete without mentioning venture capital. While in many cases it is necessary to have a substantial amount to invest, those who have the ability to invest can earn huge sums from betting on the right ideas and business models.
Unlike venture capital who mostly invest in start ups with high growth potential in exchange of a certain portion of equity in the company, private equity firms mostly invest in established and mature companies in exchange of a full control or 100% one of the company. This requires huge amount of capital as they usually invest in the tens and hundreds of millions.
In addition, some private equity groups such as http://www.fundinganllc.com give companies a business line of credit. This is also one way for them to make money.
These investments all have their advantages and disadvantages, but each of them can produce potentially great returns on investment. Ultimately, picking the right investment for you will depend on a number of factors, but these may help you begin to look in the right direction for your upcoming investment plans. Always remember to educate yourself first about the particular investment you’re eyeing before you put your hard-earned money into it.