Can Risky Investments Actually Make Your Portfolio More Secure?

by Andrew McGuinness     Jul 16, 2019

As a new trader, you might be afraid of risks to the point you avoid them altogether. The problem is, all trades involve risks to some extent, and if you’re willing to invest in a couple of high risk stocks, you also have a higher chance of making it big.

So, when considering what assets and stocks to fill your portfolio with, reconsider just how much risk you are willing to take. Here are three highly risky stocks that may not only keep your portfolio secure and balanced, but could provide you with the highest returns you have ever seen.

1. Options

If you are trying to keep track of the happenings of the market and predict the timing of the market improving or collapsing, you have a future with options. By investing in options your goal is to time the movement of stocks in order to buy before it hits big and sell before a stock begins to lose stamina. Of course, you have to be very careful timing the market. There are countless unpredictable factors involved when timing the market, and these need to be kept in mind.

It is very unlikely that someone will correctly predict the most influential movements of the market time after time. Actually, it’s very unlikely that someone times a stock correctly at any point within their trading career. For this reason, options are a risky asset to invest in. However, if you do decide to invest in options, you have the chance to receive incredibly high returns when done right.

2. Initial public offerings

Initial public offerings, or IPOs, are mainly risky because you don’t know exactly what you’re getting into until an extended period of time has passed. This is because a lot of IPOs are actually start-ups that are just now hitting the market. You are not able to tell how stable, successful or unsuccessful an IPO will be until you give it time to grow and wait for it to either prosper or fail on the market. IPOs are big risks mainly for this new and inexperienced quality.

If you have enough faith in a private company that has newly hit the market, and are able to sustain big losses, definitely invest in this IPO. Of course, there’s a chance that you could suffer losses, but there is also the chance that if you choose right, you’ll gain high returns. The point is, do plenty of research before investing in an IPO. Even if you don’t know how they will thrive on the market, you should get to know as much about any asset before making the commitment to invest.

3. Foreign emerging markets

Foreign emerging markets have gained investors plenty of high returns over the years. The problem is knowing when to be grateful for what you’ve gained and perform a stop-loss by pulling your investment.

It’s always difficult to pull out of a growing market. You feel as though the growth is endless and pulling out will only fill you with the regret of what could have been. But the best thing to test with foreign emerging markets is how well you are able to decide when to pull your investment.

Because foreign emerging markets are so unpredictable and their growths are likely to be much shorter than you expect, it is advisable to cash in much sooner than you would for other types of investments. Appreciate any returns you have received rather than risking the big losses that are likely to come quick with foreign emerging markets.

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