What You Should Know About Speculative Investments?

Speculative investments are investments with high degrees of risk that can potentially yield amazing returns

You would have heard stories of the people who had opportunities to invest in certain big businesses when they were small startups in garages. We hear about the ones who took the giant leap and invested and are now swimming in passive billions and we also hear about the ones who didn’t invest and now have major life regrets.

We all want to make money and there are indeed thousands of ways to do so. For some, the journey is a slow and steady marathon that is ultimately worth it and for others, it is a sprint that pays off relatively fast and pays off big.

Speculative investments can give an investor a big break, but more often than not is a gigantic mistake.

Speculative investments are investments with high degrees of risk that can potentially yield amazing returns. Their focus is on growth as opposed to receiving periodic dividend income. Here, the investor is not interested in the annual income the security may bring but how much more it can be sold for at a future date.

These investments while having the potential to give you the highest gains, are also capable of causing you to lose your entire investment. The goal of the investor is then to invest now with the goal of making immense profits based on increased value at some point in the future.

There are different kinds of speculative investments, cutting across a wide range of securities, and taking diverse forms.

A common form is where the investment takes the investor into a new and untested market like new technology or new business ideas. Where technology is concerned, investments in them might seem absurd.

Imagine somebody advising you to invest in a teleportation machine. Investment opportunities that spurred the creation of the Internet and the tech giants like Facebook, Google or the many telecommunication companies we have today, started off as speculative investments.

While some turn out to be profitable, many of them crash before they have a chance to pick up. As such, investing in one means you are just taking a chance.

Another type of speculative investment is where individuals invest in their own businesses idea. In many cases, they might not have enough experience in them and the chances of failure might be incredibly high.

However, these investments give the investor chance at attaining maximum wealth as opposed to working for a company, as he or she owns the entire equity available. The disadvantage is that you can lose so much money and lose time as well which is the same with other speculative investments.

Finally, an investment that has gained ground and has attracted plenty mainstream capital is that of Cryptocurrency. People who invested in Cryptocurrencies like Bitcoin, Ethereum, and Litecoin when they were still very cheap to invest in, might now enjoy the gains of it.

However, it doesn’t mean many people also haven’t lost a lot of money from them as well.

Other forms of speculative investments include those in real estate, some highly volatile stocks, currencies, collectibles, antiques, etc.

The riskiness of these investments is part of what makes them the gigantic opportunity pots that they are. An investor willing to take the risk should, however, tread with caution. With speculative investments, the best strategy is to allocate a small portion of your capital to them.

It is also important that you ensure that you can afford to lose the money you set aside for these kinds of investments. It is also advisable that you get used to the idea of losing because a lot of times, it would happen.

Written by Lawretta Egba.