Identifying investments with high returns can be a tricky business.
Most times, the concern is that the high returns accompany high risk.
That is often the most important trigger for many to reduce their profit expectation.
After all, your investments are the key to your future financial independence.
You do not want to jeopardize them looking for higher returns.
However, you can look at planning your investment better.
The first step is undeniably investing in instruments that guarantee higher returns with minimum risk.
In case you think that this is an impossible concept, it is time to think again.
Increasingly, investment planning is gearing towards creating high return low-risk alternative.
Moreover, conventional investment instruments do not offer attractive interest rates that they used to.
But assessing your risk is very important when you opt for investments with high returns.
That is what will ultimately help them gauge their relative position and decide on an investment.
It is all about taking a calculated risk and taking position according to that.
The amount of risk is often quite reasonable on the whole.
Most of these instruments that promise a higher rate of return are time-consuming.
You do have high yield opportunities in shorter duration.
But most times, these are also the ones that carry a higher risk potential.
But risk again is a relative concept.
It depends on market conditions, the flow of economic news and an individual’s risk appetite.
A person’s monthly income and the extent of liabilities too play a crucial role in this.
Here is a list of some of the most common investments with high returns.
They are popular and modern opportunities with relatively low-risk quotient.
Investments with High Returns
Here is the list of the top investments with high returns:
- Peer to Peer Lending
- Initial Public Offering
- Dividend Stocks
- Preferred Stocks
- Money Market Fund
- Real Estate Investment Trusts
1. Peer to Peer Lending
This is perhaps one of the latest investment instruments promising high returns.
A function of the increasing use of internet-based transactions, this is gaining popularity.
It is not just an investment with high returns, but also a profitable short-term opportunity.
In fact, many financial experts recommend this highly for convenient short-term mobilization of money.
In this case, you are not buying any share or bond.
You are simply lending your money to someone who may need it.
The loan amount can vary from $1000 to $10,000.
The duration of the loan is also flexible.
You can even choose to loan small sums to multiple people instead of one person.
For example, if I can spare $5000 and am ready to lend that, I can decide how to split.
It can be either a straightforward $5000 loan to one person.
The other option is I become a part of the pool of lenders to multiple people.
The rate of return may vary in case I am distributing it amongst many.
There are many online Lending platforms that facilitate this P2P lending.
The advantage of associating with these platforms is that the relative risk is much lesser.
These lending platforms undertake screening of borrowers and lenders.
So the relative risk is much limited in this type of organization.
On an average, the rate of default is not more than 5%.
This is a rather low level of default.
There are some with an even lower count, around 3%
Moreover, the interest rate is sufficient to cover the losses.
The annual rate of interest earned is often between 8-10%
So, if you are careful and offer loans to genuine borrowers, you can earn a tidy profit.
You can also actively diversify your portfolio in this way.
2. Initial Public Offering
Though the risk profile of investing in IPOs is significantly higher, it is an investment with high returns.
In most cases, it is an easy short-term investment opportunity.
You see these gaining momentum during the euphoric phase in markets.
These investments are based on a simple principle of the difference between IPO rate and actual valuation.
For those who are confident about valuing stocks accurately, this offers a wonderful window for quick gains.
Think about the 2017 Snapchat IPO.
Depending on how much the stock value rises on day 1, year 1 and longer term, you can get a handle on the profit.
There are some who are flippers in the market.
They buy and sell the IPO on day one.
All they are interested in is to take advantage of the euphoria and the price gain on day one.
However, this is the forte of extremely experienced investors.
Those who are relatively new in the market should not even try.
You must be able to read the greed and fear cycles appropriately.
You can also make money from an Initial Public Offering over the longer term.
For this, you need a lot of patience and also in-depth understanding of markets.
One interesting example will be that of the TCS stock.
The stock listed at a 26% premium to the IPO price band in 2004.
You may have made money on day 1 by flipping.
If you held on to the stock, it has delivered close to 1100 percent returns since listing.
Not just that, the company also issued bonus shares in the interim.
But you have to be careful about selecting the right companies.
Not every company will deliver the same rate of returns.
You must carefully analyze your investments to guarantee the maximum profit.
3. Dividend Stocks
Do you know anyone holding the Colgate stock?
Ask them why they will not let go their shares for anything?
This is primarily because it is one of the best investments with high returns.
In this case, you invest in stocks with steady returns and also take advantage of the dividend payout.
So, it becomes a simple way to derive better value from the same investment.
Let’s say that you have the option between stock A and B.
Both are offering the similar rate of return, but B also pays an annual dividend.
So it surely becomes a relatively better option to invest in B.
For the same amount, you will be able to derive a lot more value.
However, identifying the most appropriate dividend stock can be an uphill task.
If you do not have adequate market experience, you may end up choosing a relatively low-grade dividend stock.
The problem is when the stock falls, it will take down your investment too.
A relatively safer option will be to invest money in the dividend stock mutual fund.
These funds generally target companies that are good fundamental stories and pay a steady dividend.
This, therefore, becomes a convenient investment with high returns and minimum risk.
This also introduces the much-needed diversification in your portfolio.
One of the biggest advantages is that you do not have to invest time in research.
You get the benefit of investing in Mutual Funds and dividend stocks simultaneously.
For many of the market participants who are relatively new, this offers strong opportunity to clock higher returns.
Often the profit from an investment is measured on the basis of the consistency of returns.
This is where these dividend stocks and dividend MFs come across sure winners.
They undeniably help investors enjoy higher and consistent returns.
4. Preferred Stocks
The stock market offers a few other interesting opportunities for investing.
The Preferred stock surely promises investments with high returns.
It trades like a normal stock but is generally a hybrid share.
So in many ways, it can be referred to as a stock that acts like a bond in many ways.
The dividend rate on these is usually higher than what you can get in CDs.
On an average, these offer at least 2-3% higher rate of interest.
But the interesting part is, these stocks operate in a fairly narrow range.
This, no doubt, creates better prospects for profit.
It ensures that you continue to get a steady return on this investment.
They generally offer monthly and quarterly payments.
Normally the dividend amount can sometimes qualify for long-term capital gains.
So in terms of trading these stocks, they operate pretty much the way normal stocks do.
They are, of course, subject to a variety of market swings and you also have to look out for the tax rates.
The taxation norms that way are the most material risk associated with this kind of investment.
One big advantage is rating agencies grade most preferred stocks.
This means when the investor is buying preferred stock; they are mindful of the degree of risk associated.
This can at times be a big benefit for investors.
It helps them make an informed choice and be fully aware of the risk associated.
So the stocks with lower rating always carry a bigger risk of default.
If the company is liquidated, preferred stock shareholder get the money back first.
However, they do not have voting rights in the company they are investing in.
But given the higher rate of return, that is only a small advantage to forego.
5. Money Market Fund
This is a relatively low-risk investment with high returns.
The money market fund is actually a type of mutual fund.
It is specifically created for investors who want to preserve every bit of their principal investment.
The main objective of the money market fund is minimizing the risk of investment and also generating interest for the investors.
The primary goal of this type of fund is to maintain a minimum $1 NAV.
The minimum $1 per share net asset value represents a relatively stable return scope.
I will not say that these are absolutely foolproof investment options.
But the good news is they do come with a reliable track record of stability and profit.
They invariably are associated with the ability to safeguard the underlying fund value.
The instances of the NAV dropping below $1 level are relatively low.
In fact, it is a possibility only in extremely rare cases.
There are different ways to take the position in these money market funds.
You may appoint a broker, or you can associate with banks that offer high-interest savings account.
You cannot surely compare the rate of interest with many other high return instruments.
But again, this instrument also offers you the comfort of not worrying about your principal.
At the same time, you are also earning a certain degree of interest on ut.
Most importantly, you do not have to keep worrying about your principal amount.
That is one of the biggest advantages of choosing this kind of investment instruments.
You are simultaneously able to address multiple concerns in one go.
While you are doing all of this, you are also able to maintain a stable rate of interest.
This interest amount keeps accruing over a point of time and adds to the profit margin.
6. Real Estate Investment Trusts
This is a very interesting avenue for investments with high returns.
But this is suitable more for market veterans who have a clear idea of the dynamics.
This is surely not appropriate for beginners who are just about getting their hands wet in markets.
Real estate traditionally is associated with consistent appreciation and high returns.
But the problem with real estate investments is that they need a lot of money.
Moreover, financing has to be arranged for it, and the property needs to be cared for.
That can be an area of concern at times.
However, the REIT or the real estate investment trust provides a mid-path.
These real estate trusts invest in a pre-decided pool of properties.
This can range from commercial to residential real estate.
They then help you clock profit on the basis of the price movement in the real estate space.
The investment in these trusts is significantly lower than complete houses or office space.
But, you must remember that these trusts are prone to swings depending on the market movement.
The rate of interest, economic situation and movement in the real estate market all have a bearing on the prices.
The fluctuation in the real estate market is considered to be one of the biggest risks for these investments.
The higher the divided offering from a REIT, the higher the risk quotient too.
But like I already mentioned at the very behest, this is not for the weak-hearted.
If you have developed sufficient amount of market understanding, you can risk investing here.
While the 10-15% dividend is very attractive, the risk to your investment is no less.
However, if you can read the market movement well, this offers an attractive opportunity to pocket high returns on your investment.
This is again one of the high-risk investments with high returns.
Cryptocurrencies like Bitcoin and Ethereum have clocked stupendous gains in 2017.
The dream run is set to continue in 2018 as well.
For both Ethereum and Bitcoin, the target price indicates a large room for upmove.
But this is an investment avenue that you must tread with caution.
While Bitcoin and Ethereum offer great returns, there are some scams in the making too.
Investors must be careful about the counters that they invest into.
Moreover, they have to be careful about the kind of wallet that they choose to store their returns.
There are many instances of online theft and hacking of cryptocurrency wallets.
So investors have to undertake thorough research before committing their money in this space.
However, if they are confident, this sector is well on track to generate very high returns.
In fact, Ethereum is seen touching the psychologically important level of $2000 by end of 2018.
That means investors can easily look at earning a steady profit
So, this too features prominently in the list of investments with high returns.
The consistency and the extent of returns are what attracts investors to this kind of Investment Avenue.
Therefore, we can conclude that there are many different types of investments with high returns.
The exact instrument will depend on an individual’s return expectations.
There are some that guarantee high returns but significant amount of risk too.
But there are many others where the risk does not justify the return prospects.
The trick is to make informed choices depending on the extent of profit they wish to make.
Let us understand a basic concept that there is nothing like a free lunch.
All investments with high returns also carries a certain degree of risk.
So you have to calculate the amount of risk you are comfortable with.
That will help you decide on the most profitable investments with high returns.