Investing your money is always going to be a risky thing. However, there are some investments that are far riskier than others. So much so, that many people often recommend to stay away from them. If you’re looking to invest but aren’t sure where to start, here are a few of the riskiest investments you can partake in.
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Penny Stocks
Penny stocks aren’t what some people think. Despite what the name might suggest, these stocks don’t cost one cent. They can cost from $1 to $5, which seems like a safe investment, right? Well, the truth is that penny stocks, regardless of their affordability, are an investment with a lot of risk involved. You typically see penny stocks in a process called day trading. Day trading is when you purchase multiple penny stocks and sell them back quickly within a 24-hour time frame. What makes this excursion so risky is because it can be highly volatile, there’s barely any financial security and there’s next to no liquidity.
If you’re a beginner, liquidity is a term used to describe how easy it is to convert something into cash. Volatility categorizes what’s unpredictable, like a sudden surge in prices or a stock market crash. However, day trading isn’t without potential value. Successful traders can see a large profit if they know what they’re doing and where to find the best penny stocks. It’s recommended you review a day trading guide to get a feel for what’s involved and see where you can maximize your profits.
High-Yield Bonds
A bond is what’s known as a fixed income instrument. They work similarly to a loan or an IOU and are typically used by businesses and corporations. There are many types of bonds, but one is a lot riskier than the others. These are known as high-yield bonds, or junk bonds. The interest rates attached to these particular bonds are very high due to their lower credit ratings, which makes them have very little ROI.
Initial Public Offerings
Initial public offerings, or IPOs, are one of those investments that sound really good on paper but are highly volatile. You see, IPOs may not make good on whatever it is they promise you. There’s no security, historical data to research or any shares. Choosing to invest in an IPO is basically taking a shot in the dark. You can only go off their current business model and hope for the best. If you use a robo-advisor as opposed to a human broker or advisor, these are some of the risk details that you might be missing out on.
Trading Currency
This one is an investment that’s best handled by a long-time investor. Currency trading can be one of the most difficult and complex forms of investment you can do. Currency trading is when you buy or sell currency on the foreign exchange market. Compared to what we’ve talked about here, currency trading is very liquid as you’re trading actual money. However, the process itself is very complex and is far from beginner-friendly. If you opt for trying it out, your best bet to minimize the massive amounts of risk is to get in touch with a well-educated trader. If all goes well, you could potentially see a huge profit, but you have to extensively research the current market and devote a lot of attention to it.
