By Future RE Capital Management
Any serious investor should strive for this. To choose assets with such finesse that you earn a maximum return on your capital.
For investors, what precisely are these enigmatic choices? Should high return always imply high risk? Read on to learn the ropes and take on the pros with equal aplomb. The ability to maximize your financial resources is within your reach.
How Do High Return Investments Work?
Investments with a high yield can provide a good chance for profit, usually in a short amount of time. But they typically include some degree of danger (and not always a small one). Nothing in life is without cost, and investing is no exception, but it pays to know how to assess the potential dangers of any high-yield investment.
For high-yield investments to be successful, they must appeal to those searching for a higher rate of return. In most cases, the term “opportunity” refers to a fixed-income instrument or plan. It should also be highlighted that investors, depending on the type of investment, may need to be prepared to take on more risk in order to gain access to potentially bigger returns (known as yield).
Investments With A High Return and Minimal Risk
While it’s true that many possibilities for big returns on investing also carry a higher degree of risk, this is not always the case. There are prospects with far lower levels of danger for the investor.
For this reason, it’s crucial to spend adequate time learning about the sources of profit. You should also find out if there are any risks that your investment won’t pay off. When you have this information, you’ll be in a better position to choose the best investments for you, whether they’re high yield but high risk, low yield but low risk, or high yield but short term opportunities.
See below for a breakdown of some of the most typical high yield prospects, organized by the degree of risk they entail. We’ll discuss a couple low-risk choices (for those who prefer to play it safe), one high-risk possibility (for those who enjoy taking chances), and a few in between (for those who are most at ease with the middle ground).
Preferred Stock: Lower Risk Stock
Companies may also issue preferred shares of stock. This stock is more akin to a bond than a common stock, and its dividends will be distributed ahead of those to holders of common stock. Preferred Stocks have some advantages, such as increased bankruptcy security.
If the company you own Preferred Stock in declares bankruptcy, you will be better protected than regular stockholders and will receive payment before they do. Some investors find the middle ground between the safety of bonds and the excitement of the stock market in Preferred Stock.
Certificates of Deposit: Lower Risk Investments (CDs)
Investments in CDs carry a minimal chance of loss. The trade-off for reduced risk is a fixed period of time during which you won’t have access to your investment funds. The Federal Deposit Insurance Corporation backs CDs, making them one of the safest investment options available from financial institutions.
CDs entail much less risk than other investment options, thus their returns are often more conservative as well. The rate of return is a fixed percentage agreed upon in advance that will not change due to market fluctuations (including interest rate volatility).
P2P Lending Carries A Greater Degree of Risk.
P2P loans, which are a type of peer-to-peer lending, don’t need the borrower to put up any sort of security in order to get access to the money they need. These investments carry a greater degree of risk because the investor has no assurance of repayment and limited options in the event of borrower default.
Despite the inherent dangers, Peer-to-Peer Lending has grown in popularity in recent years, thanks in large part to the proliferation of internet platforms that connect borrowers with investors who are prepared to take on their loans.
Dividend Stocks: A Moderate Risk Investment
Paying dividends on stocks is not without its share of risk, much like the overall stock market. Yet there is a significant distinction between the two. Since dividends will be paid on dividend stocks on a regular basis, investors view them as a safer and more reliable investment option than the stock market as a whole or other similar alternative.
Astute investors are aware that there are two approaches they can take to Dividend-Paying Stocks.
To invest for dividend yield, one must look for businesses (such consumer staples or utilities) that are able and willing to offer larger dividends.
If you’re looking to invest for dividend growth, one option is the group of firms known as Dividend Aristocrats, where dividend payout levels have climbed regularly over the last decade. You won’t get rich working for them, but they have a stellar reputation for competent management and a sound financial bottom line.
Equity Real Estate Investment Trusts: A Medium-Risk Investment
The most typical kind of REIT deals with equity rather than debt. They are real, brick-and-mortar buildings that someone owns and manages (note this differs from Mortgage REITs, which are investments in mortgages and subsequent related assets). Equity REITs can be involved in every aspect of the real estate industry, from buying and managing properties to developing and selling rental income streams.
Equity real estate investment trusts make money from rental income. You could be dealing with a diversified or niche investment vehicle depending on the REIT itself. Generally speaking, Equity REITs are fairly steady and predictable in terms of their finances because their revenue is dependent on the collection of rent.
Bonds Issued by Corporations Are A Medium-Risk Investment.
You’ve probably guessed correctly that “Corporate Bonds” are bonds issued by a corporation. The ultimate objective of issuing a Corporate Bond is to raise funds for some business endeavor. The ultimate goal is to secure funds for running the business or investing in expansion-oriented upgrades.
When you invest in a Corporate Bond, you will receive interest payments (often semiannually) and the principal amount of the bond will be reimbursed on the maturity date. When looking into Corporate Bonds, it is essential to check their credit ratings.
Both Standard & Poor’s and Moody’s are third-party, impartial rating agencies. The term “Junk Bond” is used to describe any bond with a rating of BBB/Baa3 or lower. Due to the higher default risk, these are not recommended as investments. The risk of losing your entire investment is high in that case.
Rising interest rates (which would reduce the bond price) and the possibility of default are two of the risks you take on when investing in Corporate Bonds.
Investment Property Crowdfunding
Crowdfunding in the real estate industry allows individuals and groups to pool their money in order to make larger investments in properties. Crowdfunding for real estate involves three main steps. When an investment is made, a sponsor often handles the search for and management of the capital. Crowdfunding websites are another option for attracting potential backers and securing financial backing. A last type of participant is the investor, who puts up money or promises a certain rate of return.
Through crowdfunding platforms like opportunities offer by Future RE Capital, investors can pool their money to buy real estate with modest initial deposits.
About Future RE Capital Management
Future RE Capital Management taps into the US investment property assets market, valued at over $162.8 billion. With over $275 million in Assets Under Management, Future RE Capital Management is focused on the acquisition, renovation, leasing, and sales of multi-family and residential assets in affordable housing markets, helping investors realize a ten to fourteen percent annual return on their investment. Visit our site to find out more information about short-term opportunities.
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