Different Kinds Of Investment and Their Advantages. Part 2

In the last article, our spotlight was on low-risk investment and their advantages. for this article, we will focus on high-risk investments and their advantages. As the name connotes, high-risk investments are investments that have high margins, which in turn means that the volatility of such investments is high. The chances of losing money in such type of investment are also high.

However, they are very juicy and investors can get up to double their initial capital. They may be long-term or short-term, but with experience, the shorter the duration, the likelihood of huge losses, because in reality, it takes a while to flip money as it requires strategy and planning.

Here are ways that you can earn huge dividends as passive income when you invest in some of the options below:

  1. Start-Ups: Investing in a new business is often called being an Angel investor. According to Founders Africa, 30% of startups fail in the first 3 years, 50% do not make it past 5 years and 70% of start ups close down in 10 years. With this stat, the guarantee of getting dividends from investing in a start up are staggeringly low. However, when they do succeed, whether they through an IPO or whether through a buy out, the investors make a huge amount, even up to the tune of three times the initial investment. Take Instagram for example; Steve Anderson was the first investor for Instagram with the sum of $250,000. And with a 12% stake, would later get $78m when Facebook bought Instagram. If Instagram had failed, Steve would have lost all his money. But Instagram succeeding gave him good returns on his investment. Investing in a start up is high risk, but it's worth it, when the start up succeeds. However, it is advisable to consult experts to help you look into the idea and the books of the start up you want to invest in.
  2. Bonds: unlike government bonds, company bonds and bonds of countries that are fast growing but not yet stable, are high-risk investment. Cooperate bonds are issued by companies with high dividends between 7-12%. However, because they are used to trade, they are volatile and an investor may lose interest and even lose capital. Sometimes, the organisation may default on its bond and may fail to make timely interest or capital payments.
  3. Cryptocurrency: over the years, there's been a trend where individuals invest or save in crypto and get back much more money than was put in initially. The crypto currency market is a decentralised currency market that is not backed by assets and run independent of the central banking system. Currencies fluctuate based on interest or some sort of sentiment as traders hope that a currency will trade better than another currency. Because this is not a sure and accurately predictable market, it is risky to invest in. Cryptocurrency trading yields a lot of dividends as interests can go as high as 300% on initial capital, but can also come down by thesame margin causing a loss of interest and even capital.
  4. Stocks: stocks are securities that are issued to an investor when he buys shares from a company that has gone public. The stocks are proof that he's a part of the company and has a stake in the companies profit or loss. Stocks are also traded, and their value at any point in time is dependent on the demand for that stock. If there are more buyers for a stock, there will be sellers and the price of the stock will invariably go up. If there are less buyers, the price of the stock will go down, because of less demand. This trend is why investors buy stocks, and hold on to it, hoping that there will be a high demand for the stock, and then they can sell and make profit from the price difference. This is risky, because there's no guarantee that the stock prices will go up or down, as it is dependent on market forces.

In conclusion , investing is a good means of having passive income, as it allows your money work for you. It is best to study the pros and cons of any investment before putting your money into it. If you love this, you will love 5 Ways Never to Run Out of Operational Costs.

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