INVESTOR’S PICK: Sky-High Return Investment Options with No Risk. Fact or Fiction?
Low interest rates from recent years have left traditional investors frustrated since guaranteed instruments are yielding virtually nothing. And even when these rates will certainly rise again in the future, guaranteed instruments are not likely to ever outpace inflation. For many investors seeking a significant ROI and not wanting to risk losing their principal, this creates quite the conundrum. This is the reason why many investors are always on the lookout for top investment plans where they can double their money in few months or years with little or no risk.
Nevertheless, investment products that yield enormous returns with zero risk are not a reality yet. So far, risk and returns are run a bit in parallel (i.e., the higher the returns, the higher the risks, and vice versa). This means that while deciding on an investment opportunity, you have to carefully match your risk profile with the risks inherently connected to said product before committing to an investment. Some carry high risk but have the potential to generate higher inflation-adjusted returns than other asset classes in the long-term, while others come with either high-risk and lower returns or low-risk and low returns.
Understanding investment risk as a whole and all the types of risk you can encounter is paramount. A common mistake made by most investors is assuming that an option is either “safe” or “risky.” The wealth of offerings available today often cannot be classified so simply.
For instance, you have several investment options that pay higher rates of interest than CDs and treasury securities with a still very reasonable amount of risk. Or, when you take a closer look at CDs and high yield saving accounts and start considering the not-so-high liquidity and how volatile an economy can become, the risk increases for these often-considered safe investments. Even if you can’t actually make a fortune without risking anything, for those who are willing to explore all their options, they can significantly increase their investment income without having to lie awake at night worrying whether their money will still be there in the morning.
To further expand on the types and levels of risk that a given avenue can have, let’s take a look at some of them, like market risk, which is the potential for market value loss of an asset. This risk is primarily applied to equities and secondarily to fixed-income investments. In addition to market value, other risks associated to fixed-income investments are interest rate risk, purchasing power risk, and reinvestment risk—basically a loss of value associated to a change in interest rates, loss of purchasing power due to inflation for the investment (the ones intrinsically tied to a currency, for instance), and a risk of being reinvested at a lower rate of interest when it matures, respectively.
You also have general risks that can affect a large group of assets and avenues such as political risk, meaning a political action that can diminish the value of an asset, venture, or a whole market. There’s legislative risk which implies value return or capital loss due to specific legislations and directly connects to tax risk, since taxation is decided by legislation and can affect all investment types.
Lastly, we have liquidity risk, which is the possibility that the asset or investment won’t be available for liquidation when it’s needed and applies to fixed-income investments, real estate, and other property that may not be able to be quickly sold at an equitable price, such as private company equities.
In summary, fixed-income investments, such as bonds, high-yield saving accounts, and CDs, are exposed to interest rate, reinvestment, purchasing power, and liquidity risk, while stocks and equity-based investments are more susceptible to market risk. And while a few investments, like annuities and municipal bonds, are partially shielded from tax risk, political and legislative risk affects all investment types.
As you can see, the specific types of risk that apply to an investment will vary according to its characteristics and therefore, the level of risk associated with an investment is not such a simple thing to measure. Even among securities you’ll get variations according to their types as a small-cap technology stock will obviously have a substantiable market risk over a preferred stock or utility offering, even though many large-cap utilities pay above-average dividends. Do you remember that phrase we said at the beginning, “The higher the returns, the higher the risks”? It’s more complicated than that.
But still, in general, the level of risk directly corresponds with its intrinsic potential for rewards. Which leads us to a new classification that’s based more on the spectrum of uncertainty than an actual threat. The less uncertain an investment, the less return is likely to yield.
You have your CDs, treasury securities, savings bonds, life insurances from highly rated carriers, fixed and indexed annuities, and insured municipal bonds which are all considered “safe” but actually have many risk types that can affect them, and usually, their returns can yield losses when adjusted to inflation. Then you have your rated BBB or higher investment-grade corporate bonds and uninsured municipal bonds, which are considered safer than preferred stocks, utility stocks ,and income mutual funds, which in turn are less uncertain than equity mutual funds, blue-chip stocks, and residential real estate.
But for instance, the real estate market as a whole rarely goes down in value and their assets typically over-valuate since they have fewer types of risk affecting them—even when they’re less liquid and by definition less certain than a municipal or corporate bond. Additionally, you have the fact that a credit rating change can affect an investment such as a BBB-rated investment-grade corporate bond, which is usually considered safer, leading a company to not reach further needed funding to continue operating, which in turn will lead to the partial or complete loss of your investment.
Examples such as this can be found in numerous small and mid-cap stocks, small-cap funds, and mutual funds that invest in the technology and energy sector. They are usually considered “riskier” but with well-performing assets across the board and, in most cases, with a higher liquidity than CDs and treasuries.
And lastly, we fall into what’s considered investments with speculative risk that yields aggressive return. For instance, oil and gas investments, limited partnerships, financial derivatives, penny stocks, and commodities. All of them with varying risk types affecting them but sharing their largest hurdle, a high entry level. Yes, the largest hurdle for the average investor interested in participating in the oil sector, per se, is not a direct market threat to the asset but the narrow entry gap for said market in order to be viable. Take IPOs. Your application commonly doesn’t mean you may get an allotment or a single share applied, leaving you completely out of the primary market where more than 65% of the newly listed companies trade well above their issue prices and can net you returns of up to three times your investment in a really short time.
Not so speculative, not so uncertain, just hard to get in.
But, do you remember what we said at the beginning about “enormous returns with zero risk are not a reality yet”?
Well, yet is accurate. But imagine if a new type of asset could offer all the certainty akin to safer avenues, high returns, liquidity, and a continuous increase in value like the more speculative assets and without their entry-level limitations?
There’s actually a company from the fintech sector that has thoroughly studied every investment tool, and it’s currently on a crusade to change the financial world forever.
This company is called Konzortia Capital, a holding for a consortium of fintech companies that has created a different type of equity, a New Asset Class (NAC) called Koura with special features that mix the advantages provided by stocks of a private company with the liquidity of shares traded in a traditional stock market. A liquid instrument that has intrinsic value will benefit its holders with dividends paid out yearly and will be the base currency for all transactions that take place within a flexible platform developed with a widely used programming language. Cutting-edge technology applications and the financial services offered by this consortium that, with the necessary business intelligence, is aimed at developing the next generation of a globalized financial market.
A complex and unique product capable of satisfying the most demanding and sophisticated investors, like you! If you’re still not excited about this, you should be. Follow the link and learn more about this opportunity for visionaries only!