Investment Advice – Understanding Investment Opportunities
The question of how to make the most of your wealth and choose an investment opportunity is a difficult one to answer. For some people, they choose to invest in property. For others, they choose to invest in the stock market. Finding the perfect investment for you takes time, an achievable financial plan, and clear advice from financial advisers with your best interest at heart.
In this article, we’ll be going over the two types of investment opportunities, with the aim of giving you a fuller understanding of both types. By giving you this investment advice, our hope is that you will be able to make better financial decisions.
Designing Your Financial Plan
In order to choose the right investment opportunity for you, it’s important to understand your financial goals. By doing this, you are taking the first step towards creating an actionable and achievable financial plan.
But how do you characterise financial goals?
It’s simple: all you have to do is to ask yourself what kind of return on your investment you’re looking for.
Are you looking for a large, lump sum payout and feel confident in your investment decisions? Or are you simply looking for a small investment, one which could provide a small but recurring payout?
It’s important to note that neither of these two goals is necessarily better. Each simply matches a different long-term financial goal. In this case, the key difference between them is that they inform what kind of investment opportunity you’re looking for.
Generally speaking, these investment opportunities are loosely organised within two categories: High Risk and Low Risk investments. Scroll below for our breakdown of these two categories.
High Risk Investments
High Risk Investments are those wherein there is a high chance of loss capital or under performance on the part of the investment.
Admittedly, the definition of high chance is entirely subjective upon your definition of ‘high risk.’ For some investors, a 50/50 chance of failure is enough to dissuade them from investing. For others, however, a 50% chance of failure is considered to be relatively manageable in comparison to something like a 90% chance of underperformance.
At the same time, this is only one facet of a High Risk Investment. The other is the magnitude of any potential losses to consider. For example, a 95% chance of failure is a much lower risk for an investment of £500 than it is for an investment of £100,000.
Examples of high risk investments include:
Crypto currencies (such as Bitcoin), blockchain companies, cryptocurrency funds and initial coin offerings are all examples of Crypto Assets. We’ve previously discussed the volatility of Crypto Assets, so it should come as no surprise that they are considered a High Risk Investment.
The volatility of the foreign exchange market is due to the shifting worth of the two currencies in relation to one another — both currencies can go up and down in worth at any point in time. As a result, you have multiple variables to keep track of at any one point in time. This makes it a less than ideal investment opportunity.
Hedge Funds’s volatility is due to several circumstances. The first is the fact that you, as the investor, have no control where your money has been invested once it has been passed to the hedge fund. As a result, you may find yourself losing funds on an investment that you yourself would have found unacceptable but which the fund believed to be worthwhile.
Real Estate Based Securities
Real Estate Securities is an equity and debt security of a publicly traded or private company (including Real Estate Investment Trusts and pass-through entities) that own real estate or loans secured by real estate.
As a result, the success or failure of any Real Estate Based Securities is based on the continued accumulation of worth of that real estate and the continued existence of the company in which you are investing. If the worth of the real estate falls, you make a loss on your investment. If the company with whom you’ve invested begins to lose worth or folds, you make a loss on your investment. As a result, Real Estate is considered to be an extremely high form of investment.
Low Risk Investments
In contrast, the opposite of the High Risk Investment is a Low Risk one.
As you’d expect, a Low Risk Investment is one where the risk — both in terms of failure and in magnitude — is much smaller. As a result, however, the amount of capital you stand to earn is much lower than with High Risk Investments.
Despite this lack of immediate return on investment, it’s far easier to incur a long term return with Low Risk Investments. This means that it’s far easier to generate a sustainable return of interest on a Low Risk investment than it is from relying only on High Risk Investments.
As a result of the stability inherent in Low Risk Investments, most financial advisors agree that for most people, investing in a Low Risk Investment is a far better piece of financial advice than investing in a High Risk Investment.
Examples of Low Risk Investments include:
Bank Savings Accounts
Putting your money into bank accounts has often been considered the safest way to manage your money. The return of interest on these types of investments is usually quite small in comparison to most other investments, however it is a near-certain return of investment. This makes them the ideal investment opportunities for people looking for low risk.
Treasury Bills are debt securities issued by the British Treasury. They come in minimum denominations of £5,000 at a discount to their face value for any period not exceeding one year and have a variable interest rate. In terms of their volatility, they exist within a state between traditional stocks and shares and physical cash — making them the ideal opportunity for any conservative investor.
Money Market Securities
Money Market Securities are an excellent opportunity for investors wishing to see a small but safe return on their investment within a fairly short amount of time, at least in comparison to the investment opportunities on this list. Normally, it can take months or even years for an opportunity to prove profitable.
With Money Market Securities, however, the return can come anywhere from within a few days to a year at the most for an investment to prove profitable. This makes them ideal for conservative investors looking for a quick return.
A fixed annuity is a type of insurance policy wherein the investor pays money into it on the condition that they will receive a return on their investment based upon a fixed, agreed upon interest rate. Because Fixed Annuities are regulated by the ABI (Association of British Insurers), they provide a very stable investment opportunity.
Now that you know the difference between High Risk Investments and Low Risk Investments and have an idea of how your financial goals will inform your investment choices, you should feel much more comfortable deciding the level of volatility you are comfortable with when it comes to investing your money.
For the next step, you should speak to an experienced financial adviser. The ideal financial advisor is someone with the best intentions for you and your investment returns.
Giliker Flynn is such a company. We pride ourselves on providing only bespoke, individualised financial and investment advice to our clients. We are also proud of our ability to achieve our one goal: to create a bright financial future for you in the short and long term. As well as advice, we can aso assist you with investment and retirement planning.
We are authorised and regulated by the financial conduct authority (FCA). We are also proud members of the Chartered Insurance Institute and Personal Finance Society, as well as the London Institute of Banking and Finance.
Contact Giliker Flynn today to find out how we can maximise your investment opportunities.