Forex Articles - High Yield Investment vs Conservative Investment

If you have the tough task to find the best investment opportunity for your capital, then you should first decide which type of investment is right for you. Generally, most investments can be classified into two groups. In the first group are those investments that generate relatively low returns and involve minimal risk – we can call them conservative investments. In the second group are the high yield investments that involve higher risks, but also generate vastly greater returns – we can call these high yield investments.

Which investment is the best choice for you is a difficult question that depends on your investment experience, risk preferences, age and most importantly, your current material status. Usually, the best choice is to diversify your portfolio by investing a large portion of your capital in low-risk investment products and a small portion in high yield, risky investment products. This way you allow your capital to grow and at the same time you have protected most of it.

A conservative investment can be a bank deposit, investing in treasury bonds and obligations. These financial instruments are characterized by good security, stability and in most cases, guaranteed investment returns. The returns of the conservative investments are relatively low and fluctuate depending on the current economic status and the need of money that banks and your country have.

Usually the returns on the conservative investment products is between 4 and 8 percent per year depending on the country you are investing in. In some countries you must pay taxes on the income from your investments and if you compare the actual returns you get with the inflation of the country for one year, you will see that your profits are minimal and sometimes, the increase in prices can be greater than the increase of your capital. This means that if inflation is very high, you aren't really getting much of a return at all. That’s why the conservative investment products are usually combined with high yield investments.

In the group of the high yield investments, you will find investments in stocks, Forex managed accounts, Forex funds, hedge funds, funds investing in real estate and all other mutual funds. High-yield investments are characterized by having no guarantees, higher levels of risk and most importantly higher returns.

Usually, it's the high yield investments in the investor’s portfolio that are the reason for the increase of his capital.

High yield investments may generate hundreds of percentage points of return per year depending on the economic status, but you must also know that they have the potential to generate negative returns.

In conclusion, we will say that by investing conservatively you can’t greatly increase your material status. That’s why a high yield investment product should definitely be considered for your investment portfolio.

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