The 3 Best Investment Options For High Returns

In present times, more than ever, people are wondering what the best investment options. While high returns can never be guaranteed in the financial markets, there are several strategies you can undertake in order to better your chances at earnings these high returns. Before beginning, however, we must also note that investors need to keep in mind the risk-return ratio. As a general rule, the options that present the possibility of extremely high returns also represent the possibility of low returns. This article will cover some of the very risky strategies as well as some of the more neutral strategies (which will yield slightly less high returns) you can undertake to grow your portfolio.

Speculation

This investment class is very popular for investors that are not afraid of taking a risk in order to generate huge results. Speculation is the art of investing in stocks that are valued very low. The basis behind this strategy is that the investor can buy more stocks for the amount of money that is put in. For example, if a stock is currently price at $1.00, and advanced only $0.10 during the day, the investor has already made a 10% profit on his initial investment! In general, these speculative stocks swing more wildly in either direction due to their low stock price and market capitalization (number of shares multiplied by price per share). As such, they can present some of the best investment options as long as the investor can stomach the high risk associated with them.

Arbitrage

This strategy is used when an investor believes that two companies are about to merge or if one is going to acquire another. The way this can be profitable is that, often times, when companies are acquired the companies in question tend to exhibit extreme change in stock prices. So how can you benefit from this? Although this seems like a simple strategy, the art lies in being able to think of companies that might be a target for takeover from others. These companies include ones with high earnings but low levels of cash. In essence, you should be looking to buy shares in the company being acquired, and sell shares of the company that is acquiring.

Junk Bonds

When most people think of bonds, they think of low-risk, low-return investment vehicles. However, this is based on the assumption that the company issuing the bond has a very good credit rating. Companies with good credit ratings are not forced to pay high interest rates to attract investors. However, junk bonds are bonds from companies with very low credit ratings. That is to say, they are at a greater risk of defaulting on this debt. Once again, this is a risky strategy but if you believe that a company has an unfairly low credit rating, you can consider buying some of their bonds in order to reap the high interest payments from them.

Although the best investment options for high returns are often risky, investors who are not afraid to risk their capital should seriously consider the 3 options above.

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