How to Handle High-Risk Investments

With great risk comes great reward.

Or great loss.

In the world of investing, this statement is true. Investment experts will tell you that high-risk investments have the potential to make you a tidy profit, but that’s only if a number of things go your way.

So, you’re the kind of investor with a large risk appetite. You have made one or two high-risk investments and you’re looking for ways to manage them so that the results don’t go south.

The question is: do you know how to manage high-risk investments? Not quite, which is why you have come here for expert advice. We have it!

Read on to learn more!

Ensure You Have Adequate Capital

When you invest your money somewhere, the expectation is that the value of the investment will grow, so that you can cash out at a profit. But what if the value of the investment doesn’t grow and instead takes a negative turn?

Here’s an illustration.

You buy 100,000 shares of Company X, say at $50 per share. You’ll make a profit the moment the share price increases. The more it increases, the more money you stand to make, as long as you cash out.

If the share price falls to, say $40, the value of your investment also falls from $5 million to $4 million. Already, you’ll be facing a $1 million loss should you decide to close the investment.

In the stock market, it’s possible for your trades to be stopped out if your account doesn’t have sufficient margin. If you’re in a situation where a margin call is imminent, you have two options: Wait for the margin call and cut the loss, or pump more funds into the account.

You don’t want to suffer a big loss, which is why one of the best ways to manage high-risk stocks is to ensure you have adequate capital at hand, ready to pump in when required.

Understand the Risk Factors of the Investments You Make

Different investments have different risk levels. And the factors that drive those risks can be different.

For instance, real estate is a relatively low-risk investment. The stock market, depending on the stocks you buy, can be a super high-risk investment.

For newbies, you might be aware of GameStop, whose share price has had a wild swing, registering a 1,700 percent increase at one point. Investors who had bear positions on the stock definitely found themselves in tight spots.

Understanding the different risk factors for investment is key to managing it. You’ll be in a better position to evaluate the risk environment and find the best possible time to make the investment.

Let Professionals Manage Your High-Risk Investments

In the modern-day, anyone with good internet access and money to invest can become an investor. Apps like Robinhood have made investing in the stock and currency market accessible to almost everyone.

There’s nothing wrong with managing your own investments, but if those investments are high-risk, the stakes are high. You could lose everything, especially if you’ve put in a lot of money.

It’s advisable to let professionals manage your high-risk investments. There’s a fee, yes, but they’ll give you the best shot at success.

All the best with your investing journey and keep tabs on our blog for more helpful advice.