Aggressive investment strategies are high-risk investment strategies. These investment strategies can bring significant returns in a relatively short time, but can also cause investors significant losses. In some cases, investors who use these strategies undertake that they could lose their entire investment amount. However, for those who know how the market works, are confident about their investment decisions, and have a high risk appetite, aggressive trading strategies are a suitable investing style. If you feel this is you and you would like to level up your investing skills, here are some of the best aggressive investment strategies.
Options Trading
Options trading is part of the derivatives market. Options represent securities such as stocks or bonds. These are financial instruments that allow investors to generate profits based on their assumptions of how the market will evolve in the future. Options trading involves agreements between two parties wherein the buyer of a certain stock, for example, has the right, but not the obligation to purchase the respective asset at a specific price before or on a specific future date. Options trading can bring large payoffs during periods of high volatility in the market, however, market moves can also have a negative impact on the investment.
High-Yield Bonds
High-yield bonds are investment instruments that allow you to generate a regular cash flow, which is why they are among the best aggressive investment strategies. If you’re new to the term bond, in short, this means a loan the investor offers to a specific borrower. Bonds allow companies and governments to gather capital from investors. In exchange for the money they receive, borrowers agree to give back to their lenders the borrowed amount plus a specific interest rate.
Bonds come in different forms. High-yield ones (also known as junk bonds), as the name suggests, are meant to give lenders higher interest rates. These bonds have lower credit ratings compared to investment-grade bonds. To minimize the risks when investing in these bonds, you should do your research well and learn more about the issuing company. It shouldn’t have liquidity problems or be threatened by solvency.
Small-Cap Stock Investments
Small-cap stock investments also lure many investors who have a high appetite for risk and hope to gain high returns on their initial investment. Sometimes, these aggressive investment strategies can easily double the original investment amount. However, just like high-yield bonds, they depend on the evolution of the issuing company, which is a small one from a capitalization point of view, hence the name of this investment type.
Unlike large-cap stock companies that have a market capitalization of $10 billion or above, small-cap companies’ capitalization usually varies between $300 million and $2 billion. While large-cap stocks bring stability but don’t fluctuate tremendously over time, small-cap stocks can bring fast growth. If the venture is successful and becomes profitable, you can enjoy high returns, but if the business fails, you risk losing the whole investment amount. Therefore, you should only invest in small-cap stocks if you’ve done thorough research on the companies offering these options.
Emerging Markets Investments
Emerging market investments refer to investments made in markets that are currently developing. Usually, these markets are located in specific geographic regions such as Asia or countries from Eastern Europe, for example. Judging by their previous evolution and the current trends in their economy, these countries offer attractive choices for prospective investors. Due to the rapid pace at which some of these economies develop, there are chances for significant profits if investors choose a good strategy.
Emerging market investments offer many avenues. However, they are not devoid of risks and challenges. One of the main difficulties these investments pose arises from currency issues. In terms of risks, given that these are developing countries, they are often subject to political instability and all the regulatory havoc it can cause. The lack of a robust regulatory framework can make it hard to safely invest in these countries.
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Private Investments
Private Investments typically require higher investment amounts, which makes them suitable for individual investors who have a higher net worth. These individuals who afford to invest higher amounts also expect higher returns, but the investment strategy is typically riskier. One of the most popular types of private investing strategy is private equity investing. This strategy usually means investing in companies in their early stages and in high-risk ventures that are expected to develop. Software start-ups or companies in the healthcare sector are usually targeted for this type of investment.
These investments are called private because they are not listed on a public market. The companies basically receive money from wealthy investors who hope to make the business more profitable over time in order to gain returns. Private markets are diversified and there are different ways to make these investments lucrative, for example, by bringing new management into the firm, reducing costs, or eliminating underperforming business activities.
Article by Peak Global Management Japan.
