Dreams of high investment returns have long fueled the imaginations of those who dedicate time to considering investments. This concept has inspired generations of investors, leading to best-selling books, the promotion of day trading courses to the public, and the accumulation of millions of dollars in profits.
But is this really achievable? And if so, how can one achieve high returns on investment? In this article, we will explore the answers to these questions. Let’s dive in!
First, let’s tackle the initial question: Is it really possible to achieve high returns on investment?
The answer is yes. Look at those who invested early in startups or real estate and received returns that exceeded the S&P 500 benchmark; their success stories serve as compelling evidence. It is important to note that while theoretically possible, there are few foolproof methods. (If there were, wouldn’t we all be using them?)
In general, investment carries risks. While there are no guarantees of consistently high returns, you can take various measures to increase the likelihood of achieving substantial gains under certain conditions. In other words, you can position yourself for a chance at success.
Remember this and understand that there are no absolute guarantees in investing. Here are some common techniques and strategies used by experienced investors to achieve significant Return on Investment (ROI).
Successful investment strategies begin by establishing your ultimate goal. You need to clearly define your expectations for high returns and then reverse-engineer your investment path. When things go well, it’s easy to become greedy; knowing when to sell can prevent significant mistakes.
First and foremost, clarify your financial goals, which may include saving for retirement, education funds, property purchases, or achieving a certain level of wealth. Different strategies and risks may be required for each goal, so categorizing and prioritizing these objectives is a crucial step.
Take the time to understand your risk tolerance and determine how much risk you are willing to accept. This honest assessment will dictate your investment strategy and asset allocation.
While aiming for high investment returns is admirable, it is essential to strategically diversify your investment portfolio to avoid excessive losses in underperforming assets.
Diversification essentially involves allocating assets across different investment types, categories, and time frames to mitigate risk. It also entails regularly adjusting your investment portfolio to maintain an ideal asset allocation ratio.
It may not be wrong to passively invest your funds in several index funds for 30 or 40 years and wait for them to appreciate; however, this strategy may not outperform the market, leading to your investment results mirroring market performance. (This could be either beneficial or detrimental.)
One strategy that could potentially boost your returns is allocating a certain percentage of funds to alternative investments. While financial experts’ opinions vary, this proportion typically ranges from 5% to 15% of your portfolio.
Alternative investments encompass ventures such as real estate outside the market, private equity, cryptocurrency, and shares in private enterprises. While these choices carry their own risks, considering some diversification in these areas is advisable.
If you are prepared to take a significant risk in an investment, it is best to diversify this risk. For example, if you have $10 million to allocate for alternative investments, pouring all your funds into one project that offers the possibility of a 20-fold return may be enticing, but achieving returns of 10 or 20 times your investment is rare. A better approach would be to spread your funds across four projects you have confidence in. This way, if one project succeeds—let’s say a $2,500 investment yields a 20-fold return, bringing in $50,000—even if the remaining three investments fail, your overall returns would still be substantial.
Truth be told, all four investments may fail, and this risk must be accepted when engaging in such investments. Nevertheless, the fundamental principle remains that diversification helps mitigate the risk of losses while offering the potential for high returns.
Real estate investment is particularly favored for its ability to provide investors with higher returns. However, among the various real estate investment methods, is there a standout option that can cater to investors seeking high returns?
If there were a “no-lose” choice, it would be considered a scam. However, “flipping houses” is commonly deemed a profitable investment… provided you know what you are doing.
If you aren’t familiar with the concept of flipping houses, it involves purchasing properties below market value, renovating and improving them to enhance their value, and then selling them at prices above market value in a profitable process.
For instance, a typical house flipping operation might look like this:
While everything may seem clear and straightforward on paper, actual transactions rarely follow a plan 100%. However, understanding how to find suitable properties will reveal why house flipping is so appealing. In the example given, the 40% return on investment over six months (excluding taxes, fees, etc.) is something traditional investments may not achieve.
Although flipping houses can yield substantial short-term profits, it is not the sole avenue for earning above-market returns from real estate. Another strategy involves long-term real estate investment.
By investing in real estate for long-term rental purposes, you stand to benefit in multiple ways, including:
While you may not gain investment returns as quickly as with house flipping, in the long run, over 10 or 15 years, your overall returns might be more substantial.
Exceptional investors stand out because of their ability to perceive emerging trends and capitalize on potentially lucrative investment opportunities; leading in market trends and adjusting investment strategies to adapt to continuously changing market conditions can help achieve significant profits.
Once you identify promising trends, consider readjusting your investment portfolio to seize these opportunities. This may entail investing in companies at the forefront of innovation or industries expected to experience significant growth.
Similar to alternative investments, you wouldn’t want to allocate all your assets to emerging trends. Tracking these trends with a small portion of your investment might open doors to successful investment discoveries.
While investments can never guarantee profits, taking proactive measures to position yourself advantageously can increase the likelihood of substantial returns.
We hope this article has provided you with some food for thought and background information to help you make wiser decisions in the future.