Lets discuss high risk, high yield investments (junk bonds, fund, credit)
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Everybody is talking about the safest way to invest, but thats boring. How about instead high risk and high yield investments. I'm interested in junk bonds. Junk bonds have high interest rates because those companies have poor credit, which is why they are high risk. When bonds do default, the bond holder, on average, gets 70% of their money back, which may be 0% to 100% depending. So if they are purchased very cheap, below 70 cents on the dollar, a person can make money by defaulting. Is that right? Let me hear your opinions on junk bonds and also any other ideas for high risk high yield investments. Thanks for your input.
High-yield bond funds would give you some diversification and lower the overall risk of investing in junk bonds. I am liking my only bond fund (a closed-end fund, sovereign bonds, e.g., Korea, Brazil, Indonesia, Sweden, Turkey) as it has a nice 5.3% yield and covers a broad swath of countries, some emerging market, some established.
That's right - MLPs can be a nice income producing investment. I like LINE and EVEP. Take a look at a few of the REITs too - NLY and HTS for example. The dividend yield is ridiculous, although that may change when interest rates begin to rise. Do your due diligence, but IMO,these are all great long term income producing investment that will yield higher than 5.3%with less risk.
If you're looking for high risk and high payoffs, you need leverage. Options give you a lot of leverage. Buying long positions on options can have huge payoffs, but the risk is also tremendous, as if they expire worthless, as a huge number of options do every month, then your entire investment is gone. Short options are a little less dangerous, as there's no way to lose 100% of your investment (as long as it's not a naked call/put); however, the maximum you can earn is also severely capped. If you do a lot of short-term short options trades and they all work, you can make very large returns; however, it only takes one botched one to set you back severely.
If you're looking for high risk and high payoffs, you need leverage. Options give you a lot of leverage. Buying long positions on options can have huge payoffs, but the risk is also tremendous, as if they expire worthless, as a huge number of options do every month, then your entire investment is gone. Short options are a little less dangerous, as there's no way to lose 100% of your investment (as long as it's not a naked call/put); however, the maximum you can earn is also severely capped. If you do a lot of short-term short options trades and they all work, you can make very large returns; however, it only takes one botched one to set you back severely.
If your looking for high leverage, you cannot get any higher than spot forex. It used to be 400:1, but even since the NFA capped it at 100 it is still insanely high.
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