Many people invest their money in various investment categories to gain huge returns. However, many of them get trapped in the wrong beliefs risking all they have in the hope to gain the biggest return. These people usually end up losing all of their capital.
To gain good return investors have to always stay realistic. To help you stay realistic here are the broad investment categories and their return that can be expected.
Speculative Investment
Speculative investment promises a high potential return with greater risk. A good example of this category is penny stocks and gold investment.
To tell you the truth, big legit companies still can be speculative. The same thing, of course, can also happen to a new small company. That company stocks can undergo an 80% rise or fall in a day.
With this investment, you can gain huge profits if you choose the right sides. But you can also lose everything you have at the same time. He same thing could also happen to stocks of a company that has just gone to Initial Public Offerings (IPO).
The other speculative investment also happens to gold investment. Purchase it at the right timing before the gold crisis, you will gain a fortune.
But if you pick the wrong timing, you will witness your investment to go to a steady decline in value. Thus, you have to diversify your portfolio if you want to invest in gold and penny stocks.
Traditional Stocks and Stock Funds
To know the possible return on this type of investment you have to understand the various risk level that can happen to your investment.
Use one to five investment risk scale, for instance, to represent the highest risk to the ones having the least risk.
Investing in a single stock should be in the level five investment risk since it can make you lose all of your capital. The level four should be when you invest in the stock fund index. You can lose your money, but it is almost impossible for you to lose all of your money.
The safest investment like savings account should have a risk level of one.
Real Estate
Real estate investors are often promoted as an investment that can give you an excellent return. Yet, the fact is real estate also similar to another type of investment. It can give a potentially good return, as well as resulting in a loss.
Real estate is basically for the advanced investors who have spent years or decades investing.
Traditional Bonds and Bond Funds
In bond investment, the principal value goes down during the rising interest rates. That brings a huge impact on those long term bond investors.
If you own individual bond and plan to hold it up to the maturity date, then the fluctuation will not affect you.
