High And Low-Risk Investment Options With Mark Hauser
Every investor gets into investing with a goal, but the key to achieving those goals is understanding that all investments have some risk attached to them.
Investments like bonds, mutual funds, and stocks usually lose value quickly when external or market forces impact them in specific ways. Even conservative investments like certificates of deposits have risks.
Every investment or asset class usually falls at a particular place on the risk ladder, and the risk usually corresponds with the potential reward or return. This means that high-reward investments come with high stakes and vice versa.
Mark Hauser is a private equity principal, and he says that while investors might mitigate some risks, it is impossible to eliminate all of them. Hauser says investors can use funds diversification and strategic asset allocation to reduce risks.
Funds diversification is where investors split their funds and use them in different investments in the same asset class, like stocks. On the other hand, strategic asset allocation is where investors include different asset classes in their investment portfolios. This means that the investor does not lose much if one asset class experiences a loss in value.
For this strategy, Mark Hauser advises that investors include high and low-risk investments. Before investing in high-risk asset classes, they should also ensure they have minimal personal debt and a robust emergency fund. According to Hauser, below are the most common high-risk investments.
- Individual stocks- These give the investor partial ownership in the company they buy them from. The prices fluctuate depending on the company’s performance and valuation.
- Crowdfunding campaigns- This is when an early-stage or start-up company markets securities like bonds and shares to raise cash. Investors, in turn, receive a percentage of the business’s profits or interest.
- Peer-to-peer lending- This gives an alternative to people looking for a personal loan but with no collateral.
- Crypto asset investment- Crypto assets include blockchain companies, cryptocurrency funds, and initial coin offerings.
Mark Hauser also outlines the following low-risk investment options.
- Mutual funds- This investment allows investors to purchase small shares of varied assets instead of high-risk individual stocks.
- Exchange-traded funds- EFTs are investment vehicles based on specific investment strategies or indices. They might include varied investment types like bonds, commodities, and stocks.
- Government and Corporate bonds- The government issues bonds to get capital for different purposes, and when the bonds mature, they repay the investor’s principal plus accrued interest.
- Certificated of deposit- This savings account gives the investor guaranteed interest.