High Return Investments
High-return investments (or high-yield investments) are investments that can provide the higher return than average investments, and of course such investments are riskier. The reality is that people have different understanding of what the high return is. Some investors even imagine that if investment won’t make 50% annually, then such investment is not worthy their attention. However, in the reality such numbers are not possible over long period. Of course, it is possible that during bull market stocks will grow 50% or even more, but real investing does not depend on some short-term fluctuations while it would be a speculation but not investment.
So how much is that real high return? I would say that real average annual long term return on risky investments could be somewhere between 13%-15% (in low inflation conditions) and if you can do higher return for more than 10 years, then you are really something.
Actually, the term ‘high-yield investments’ is more accurate than ‘high-return’ because returns can be short-term oriented which is unpredictable at all, while yields show the real potential return over long period. Bonds is the best example of this: if you bought a bond at 8% yield to maturity (10 years), that means you will get such return over those years on average, of course if there will be no additional problems with payments.
Let’s look at the main classes of risky high return/yield investments:
Other high-yield speculative investment classes:
Normal high-yield investments can be a part of a good investment strategy, but one must be prepared for big losses in short-middle period which may continue for years. When investing in such risky investments, it is extremely important that diversification would include as many different sectors and countries as possible. It is highly probable that some high-risk stocks will go down totally, and because of this reason high-risk portfolio should include not less than 20 different securities.
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