Investment with Higher Rewards
Investment with Higher Rewards
Reaping the most rewards while minimizing risk is the goal of all investment strategies. The balance of risk versus reward must be assessed before making your decision as to which investment strategy works best. This will also depend on the length of your investment with higher rewards.
Goals that are many years away, such as retirement or saving for your children’s college fund, can involve more risk compared to shorter term goals such as saving up for a down payment on a car or home.
Getting Started with Investment with Higher Rewards
If you want to build up your wealth, you will need to assess where your finances are at right now. You may need to get rid of debt first, so you can focus more of your earnings towards investment. Once you have cleared the assessment process, you can get started by doing the following.
- Set a timeline
- Allocate the money needed to invest
- Seek assistance with your investments
- Assess your tolerance for risk
There is a big difference between investing in your retirement portfolio that may be 30 years away or longer compared to saving up for a down payment which may be only a few years from now. Once you have set your timeline, start by allocating the money necessary to get started. It need not be large at first and some opportunities only require a small amount to get started.
Even those who are experienced with investing can use guidance, especially with opportunities that they lack familiarity. And finally, you will need to assess your tolerance for risk which will help determine which type of investments suit your goals.
What follows are three categories of investments that offer the opportunity for higher rewards based on their risk. Ideally, for long term investments such as retirement or college funds for your children, you should choose from all three groups to maximize the reward potential while minimizing the dangers of risky investments.
Safe Investment with Higher Rewards
Safe investments usually do not entail high profit potential, but they do offer more security for your investment. As your investment gets closer to fruition, it is advisable to start switching from higher risk investments to the ones listed here. This will help protect what you have earned while still getting a good return on your money.
- Certificates of Deposit (CD)
- High Yield Savings Account
- Property Investment
- US Treasury Bonds
CDs are one of the most popular forms of investment and are available at your bank or credit union. Set up a CD account, put in the desired amount, and let it sit for the duration. These are long term investments that offer good interest rates, but you should not withdraw them early lest you pay a penalty.
Savings accounts are another safe form of investment, so you should seek one that offers the highest percentage possible. They are perfect for short-term investing, such as building an emergency fund that can be used when needed.
US Treasury Bonds, such as the Series EE and Series I offer fixed interest rates. The Series EE will last for up to 30 years, so you should not withdraw the money early lest you face a penalty.
Medium Risk Investment with Higher Rewards
Safe investments may offer peace of mind, but as good as the interest rates are, it is no match for riskier investments such as the ones listed here. Keep in mind that the risk is present, but for the following opportunities they do offer a fair amount of security.
- Corporate Bonds
- High Dividend Stocks
- Real Estate Investment Trusts (REITs)
Corporate bonds are one of the more traditional forms of investment that offers good returns. Such bonds are issued by corporations to make capital investments, such as expanding their business operations. They offer solid returns, but there is risk if the company itself goes bankrupt or shuts down.
High dividend stocks offer the opportunity for investors to reap payments made from the profits of companies that issue such stocks. The company will normally have a cash option or reinvestment plan which dictates when they share the profits. The upside is that solid, reputable companies that have a long history of financial stability make for good investment opportunities.
The downside is that the company is under no legal obligation to make payments of dividends, which can be quite annoying at times. You will need to do some research to discover which companies are the best for this type of investment with higher returns.
REITs are a great way to invest in real estate at a minimal cost. REITs that are listed with the Security Exchange Commission (SEC) can be purchased much like stocks. You are one of many investing in a money-making property. The downside is that this is a long-term investment that offers little in the way of liquidity.
High Risk Investment with Higher Rewards
The following are areas of investment that may reap considerable rewards but come with a high risk of failure.
Options are like standard stock trading. The difference is an option is that you agree to buy or sell a stock at a price that is agreed to in advance. You must weigh which direction you believe the stock will move. That means whether you think it will rise or fall over a pre-determined timeframe. This is a very risky strategy, but it can pay off with huge rewards
Penny stocks have made news recently given the volatility of this type of investment. These are stocks that cost very little, usually five dollars or less, but they are also high risk because they belong to companies with a poor track record. However, by spreading out your investment over several different companies, it’s possible to reap big rewards if a company turns around its fortunes.
Proper investment with higher rewards will involve risk, so you will need to diversify your portfolio. That way, a single investment going bad will not sink your entire investment strategy. Striking the right balance between risk versus reward is crucial to earning enough money to reach your goals while not putting too much at stake in case the worst should occur.
Investment with Higher Rewards ©Sophisticated Investor 2021
Zanthe Alexander Bentley is a finance veteran with over 25 years’ wealth management experience advising both family offices and institutions on their corporate finance requirements including capital raises (debt & equity), restructurings and M&A activities. He has significant experience in investment management and investment banking and spent nine years at UBS focused on convertible bond arbitrage and equity derivatives.
Prior to getting involved in Asset Management he expanded a small Spanish brokerage from a handful of staff in Barcelona to a diversified brokerage company with over 150 personnel spread across 9 countries, transacting deals from High Grade to High Yield Fixed Income and Loans; Structured Products through to exchanged traded equities.
After taking time to focus on family office activities in Asia, Zanthe-Alexander now leads an ambitious zero-leveraged fund providing exceptional growth and income to Sophisticated Investors.
Zanthe Alexander Bentley Twitter: https://twitter.com/BentleyZanthe
Investment with Higher Rewards