The fact that you’re an entrepreneur probably already indicates you’re willing to take some pretty big financial risks, and you probably already have a strong understanding of the fact that significant risk can often also mean big reward.
You may understand the potential financial payoffs that come with taking risks in your business, as well as the possible pitfalls, but how can you translate your risk tolerance to investments outside your business?
You may decide that since you take so many risks in your business, you don’t want to utilize high-risk strategy in your other investments, or you may feel that since you already have a high risk tolerance, you’d like to translate that to investments outside of your business.
Regardless, the following are some things entrepreneurs should know about high-risk investments.
Unfortunately, there’s all too often the tendency to feel like the safest thing you can do with your money is stash it in a savings account, and that’s actually one of the riskiest things you can do. That cash is going to lose value because of inflation, which over time makes idle cash one of the top risks you can make regarding your finances.
Learn As Much As You Can
Many of the riskiest investment opportunities are not for the faint of heart, and you need to be backed by extensive knowledge before making any big decisions.
For example, if you’re considering something like penny stocks, think about reading reviews of the Tim Sykes challenge team so that you can see not just the potential upsides of this approach, but also the possible downsides, such as fraud and illiquidity.
As an entrepreneur, you’re probably very familiar with concepts surrounding venture capital, but perhaps from the other side where you were working to raise funding for your business. What about when you’re the investor?
Venture capital is considered one of the riskiest types of investment you can make, and it requires that you have the ability to conduct due diligence and assess the long-term prospects of a business before investing.
One reason this is particularly appealing to entrepreneurs is because they’re familiar with this process, and may know what to look for when they conduct research.
Something else to consider when exploring high-risk investment opportunities are high-yield bonds. High-yield bonds are usually issued by a foreign government or a company with a lot of debt, and yields can be as much as 15 to 20%, but there is the potential that these are junk bonds.
While there is certainly the potential that the investor will lose the principal, that’s not always the case which is why high-yield bonds remain appealing for investors willing to shoulder the risk.
These are just a few of the main things to consider and methods to include risk in your portfolio. Other options include forex trading, owning rental properties, and investing in emerging markets. Entrepreneurs tend to be a group that welcomes a more risk-filled portfolio because they’ve seen the payoff of financial risks in many cases, but also clearly understand the consequences as well.