5 High-Risk Investments That Could Pay-Off Big Time

Investing is an art to be learned, part of which is mitigating your risk. However, if you're willing to dedicate a percentage of your portfolio to high-risk pay-offs, here are a few options you should consider going forward. Each of these options is a high-risk, high-reward scenario so be aware of that fact before making any investment decisions.

Initial Public Offerings (IPOs)

Initial public offerings for high-profile companies like Snapchat and Fitbit attract a lot of attention because of how common these consumer products are in our society. However, they also represent a very high risk to investors as this attention can skew the company valuation in favor of short-term gains. Any IPO is risky because of the nature of uncertainty surrounding the company's staying power in their industry. Management does not have a proven track record of leading the company to success and so there is a big reward for buying in early on successful companies, but it doesn't always mean that every IPO will be successful.

Venture Capital Funding

Start-up funding is another high-risk, high-reward scenario that comes with a lot of caveats. You should be a seasoned investor who can glance at a whitepaper and tell if a company's idea is worth investing in before you attempt to get involved with a new tech company. Even if you think the product has appeal and could be profitable, there's no guarantee that the management team in charge will be able to realize the full potential. Start-ups tend to be managed by people who have great ideas but are not very business-oriented, so keep this in mind when you consider venture capital funding as a means of investment.

Forex Trading

Foreign currency trading can be a great way to make money by trading between foreign currency pairs at different times during the day, but these trades are inherently high-risk. Finding patterns between specific currencies can be highly profitable for seasoned investors who know what to look for when Forex trading. Another risk is the lack of margin requirements for Forex trading accounts, which can be tempting to unprincipled investors.

Cryptocurrency Trading

Much like Forex trading, trading cryptocurrency is a high-risk and high-reward scenario. Spotting patterns and following the news closely for your chosen cryptocurrency can net high gains, but the volatility of the market can lead to plenty of red days. Never invest more than 10% to 20% of your current portfolio in a single cryptocurrency and monitor it like crazy to catch wind of bull rushes and bear slides. Altcoins can be an attractive investment too, but you should be wary of any coins that claim to solve a problem not accounted for by Bitcoin and other popular cryptocurrencies. These altcoins could be considered the penny stocks of the cryptocurrency world, and while some will provide a valuable base, others are pump and dump schemes promoted by unscrupulous people.

Penny Stocks

Penny stocks are often touted as a good way to get rich quick on the stock market, but that's only true if you find the diamond in the rough. Penny stocks are more akin to buying stock market lotto tickets unless you're able to find a high-volume undervalued company. These stocks are inherently riskier because their cheap nature makes them susceptible to pump and dump schemes. These schemes have become even more prevalent in the age of the internet, where groups of people can form pump and dump actions in an attempt to capitalize on suckers in the marketplace. Be very careful with penny stocks.