Every trader knows that all transactions, all investments, and all endeavors in the financial field involves risk. And that usually, the higher the risk, the higher the promise of return is. This is why there are all kinds of traders around the world. Some are willing to take on that risk while others are satisfied in their safe and steady growth. Regardless, risk is an inevitable part of trading that’s why all traders must be prepared to accept that truth. The only choice they have is to choose what kind and how intense a risk is.
This article will focus on five of the riskiest investments out there in which you, as a trader, and risk taker, can take part of for hopes of a substantial profit and be warned off.
1) Emerging Markets
Emerging markets appeal to a lot of people because of their potential for growth. As relatively new markets still accumulating trading traffic, emerging markets are one of the riskiest as well. Although there is the potential for growth, there is also the potential for failure due to its instability and sensitivity to the Developed Markets and other market events. Moreover, international companies and their stocks are vulnerable to foreign taxes, unreliable information, and global movements.
Options are one of the riskier financial instruments in the market due to its uncertainty for buy and sell as it entitles the buyer nor the holder the obligation for transaction in all types of options. Another thing is its feature which makes it very vulnerable to sudden changes resulting in quick gains and losses. If you are ready to face that kind of volatility and take on the risk and stand a chance of losing copious amounts of assets or gaining an incredible amount of profit in a short period of time, then options are for you.
Futures are very similar to options in their characteristic of changing in a very short period of time. It’s like gambling, you are just betting. And the same as options, futures involve a certain amount of risk that will subject you to instant riches or quick bankruptcy if not handled correctly. If you are not an educated nor a professional trader, chances are you’ll get the latter option of quick bankruptcy.
4) Junk Bonds
Junk bonds are bonds issued by companies that have intention of raising capital quickly because they need it to fortify their company due to takeovers, mergers, bankruptcy, etc. Because of this, it is a very high risk investment with also very high returns if it succeeds. The fact that these kinds of companies aim for instant success makes them also very vulnerable to flopping because they are unstable. This transition phase of jumpstarting the company means that companies offering junk bonds have unstable income and vulnerable to defaulting.
5) Penny Stocks
Penny stocks are just that: stocks that cost less than a dollar. Penny stocks carry a high risk in that they are very volatile and unpredictable. However, if you find the right company, you can really earn a lot for less.
Taking risks is an inevitable part of trading and there is no way you can avoid it, only reduce it through proper research and analyzation.