Compared to other strategies, an aggressive investment strategy takes on more risk in order to achieve higher returns.
“Rather than income or safety of principle, strategies for earning greater-than-average returns generally focus on capital appreciation as a primary investment goal,” explains renowned investment manager Rani Tarek Jarkas.
The aggressiveness of an investment strategy is determined by the proportion of high-reward, high-risk asset classes like equities and commodities in the portfolio.
For example, Portfolio A, which has an asset allocation of 75% equities, 15% fixed income, and 10% commodities, would be considered quite aggressive since a considerable portion of the portfolio is weighted to higher-risk assets. However, it would still be less aggressive than Portfolio B, which has an asset allocation of 85% equities and 15% commodities.
Within the context of an aggressive portfolio, the mix of equities has a significant influence on risk. For example, if the equity portion is limited to blue-chip stocks, it would be considered less risky than if the portfolio only included small-cap stocks.
Another component of a risky investing approach is allocation. A method that simply divided all accessible cash equally into 20 different stocks might be aggressive, but dividing all money equally into just five different firms would be even more so.
Most high-risk investments also involve a high-turnover strategy. One example is pursuing stocks that have demonstrated exceptional relative performance in a short period of time. Higher returns may be obtained through the higher turnover, but transaction costs may also rise, putting future performance at risk.
Hedge funds, venture capital, investments in foreign emerging markets, crypto assets, mini-bonds, land banking, and contracts for difference are also considered high-risk investments.
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Do note that the value of high-risk investments typically changes more rapidly than that of lower-risk equivalents, often being very market-confidence dependent. Investor sentiment is more delicate when it comes to riskier assets during periods of economic instability. So, people who invest in high-risk products should be ready for their investment’s value to change much more frequently than mainstream products.
That said, some investment risks are more manageable than others because they are based on sound research and a smart strategy. The key to successful high-risk investments is to work with an investment firm that specializes in these asset classes, like the Rani Jarkas financial service, Cedrus Investments. Its chairman, Rani Tarek Jarkas, is a recognized expert in private wealth management, asset management, and financial advisory services. Rani Jarkas and his firm can simplify the investing process by focusing on only the investments that best serve your interests and objectives.