Your investment strategy will depend largely on your disposable income, and how quickly you want to grow your wealth—the greater the risk of loss, the greater the potential for economic growth. However, taking a safer approach offers a steadier method of growth that won’t provide the same rapid influx of wealth. If regrowing your wealth as quickly as possible is your intention, these high-risk strategies can help.
This is the practice of buying or selling a stock or commodity at a specific price in the future. It’s called an option because you’re not required to make that purchase or sale if the market never reaches the predicted point. This type of investing is riskier in that the time requirement exposes the investor to greater risks of loss if the market doesn’t perform as expected.
Initial Public Offerings
This is an extremely risky venture because there’s no way to predict how a new company is going to perform in the public market. Ideally, the goal is to buy up several shares of an undervalued stock. As the stock price matures, those shares can sometimes double or triple in value. However, most IPO stocks don’t perform that well and show less substantive growth. Many IPO stocks flounder altogether, so this method can be hit or miss.
Venture Capital Investing
Investing venture capital in a new startup is just as risky as investing in an IPO in many ways. That same risk of investing in uncertainty is still present, so luck plays a large part in success. If the startup offers a product that goes viral, you could stand to earn a large return on your initial investment. However, there are dozens of failures for every startup that succeeds. When a startup does fail, you’ll lose any money you invested in it. Your chances of success are better when you back a startup that’s managed by someone with good business sense. This is why interviewing the mind behind the product is essential in venture capital investing.
It’s important to consider your threshold for loss in choosing an investment strategy. If you’re concerned about losing your existing savings, a riskier approach may not be ideal for you. Before making any big-money moves, discussing your goals with an advisor is always a recommended first step.