The risk and reward of investments go hand in hand and are directly related. The higher the risk, the higher the potential reward, and the lower the risk, the lower the potential reward. When it comes to investments, there is no way to eliminate risks. Risks are a part of investing, and in fact, it is one of the characteristics of investments. Since risk can’t be eliminated, the best you can do is to is to minimize it. Though the risk-reward ratio of investments are directly related, it doesn’t mean that you can’t find a higher yielding investment with lower risk. Here are some ways to have good investments with relatively less risks:
1. Reputation is key. The first thing that you need to do is find and invest only on trustworthy investment firms. Find mutual fund, real estate companies or stock brokers that have good reputations. Scout over the internet to discover which investment firms are the best, or at least have good feedback. If you invest in stocks, find companies with good reputation. Companies with a good reputation are those that have good track record, good earnings, and good outlook. If you put your money on companies with good reputation, then you’re assured of better safety and less risk.
2. High yielding instruments. Scout for high-yielding investments such as real estate, mutual funds, stocks, and maybe even bonds. These investments can make your money double in time, often with the exception of bonds. Properties appreciate fast, especially if the location is strategic while mutual funds and stocks grow fast. In stocks, money can grow by as much as 50 percent within a short period of time provided you buy the right stocks. Mutual funds are a little slower, but considering their convenience, they are reasonable. Mutual funds can make your money grow by more than 50 percent in a year.
3. Time and timing. Investments grow in time, but if you make the right timing for your investments, you can further extend their potential. Is the market doing good? Are valuations of companies cheap? Is there a huge room for growth? These are just some of the things that you should ask yourself before making an investment. Try to see which companies or probably sectors are expected to do so well in the next year or probably at least in the next five years. During the 2008 economic recession, a lot of companies have gone up by at least a thousand fold from their original values. That’s quite good growth in a little over four years. Imagine investing $1M in 2008 and multiply it by 1,000. Your $1M investment in 2008 should have become $1B by now.