Understanding high-risk investments (2024)

What is a high-risk, high-return investment?

High-risk investments may offer the chance of higher returns than other investments might produce, but they put your money at higher risk. This means that if things go well, high-risk investments can produce high returns. But if things go badly, you could lose all of the money you invested. And the chance of things going badly is higher.

Unfortunately, there’s not always a direct relationship between risk and reward – sometimes when you take a risk you don’t get any reward for it.

What we can say for sure is that if you’re looking for big payouts in a relatively short time period you’ll have to accept a disproportionately higher amount of risk.

While the product names and descriptions can often change, examples of high-risk investments include:

  • Cryptoassets (also known as cryptos)
  • Mini-bonds (sometimes called high interest return bonds)
  • Land banking
  • Contracts for Difference (CFDs)
These terms explained

Cryptoassets (also known as cryptos)
A form of unofficial digital asset based on distributed computer networks. Uses encryption for info security, not issued by central banks but by independent groups. Prices can be very volatile.

Mini-bonds (sometimes called high interest return bonds)
A form of loan that investors make to companies (often start-ups or those that are struggling to attract bigger lenders) offering a fixed return over a specified time period.

Land banking
Plots of land without planning permission, sold to investors on the basis that planning permission could be granted in future, potentially increasing the land’s value.

Contracts for Difference (CFDs)
Complex financial instruments offered by investment firms, often through online platforms. They can be used to speculate on the rise and fall in the price of a wide range of assets.

Characteristics of high-risk investments

They target a high rate of return

High-risk investments offer the prospect of returns that are potentially more attractive than those available from mainstream investments. But there’s no guarantee that high-risk investments will actually deliver high returns. In practice, the actual returns could be below those of mainstream investments.

By association, there’s a high chance of losing all your money

In fact, if you choose to invest in high-risk products then you must accept the very real risk of losing some, or even all, of your money. And with some high-risk investments, if the worst happened you could even end up not only with nothing, but actually owing money.

This makes high-risk investments unsuitable for all but the most experienced investors who fully understand the risks, as well as the opportunities, that high-risk investments involve and those who have the finances to absorb losses.

It’s harder to access your money if you need to

High-risk investments typically offer lower levels of liquidity than mainstream investments, so, particularly if something’s gone wrong and performance hasn’t met expectations, getting access to your money when you want may not be as easy.

High-risk investments are suitable for a minority of consumers, so are likely to be less actively bought and sold by investors than mainstream products.

Some high-risk products - such as land banking schemes – may involve investment in assets that are themselves not actively traded. This could make getting access to your money at short notice much more difficult. Even if short notice access is available, the investment provider may charge you a fee or you may have to pay penalties.


High-risk investments often see more volatility than their lower-risk equivalents. The value of high-risk investments tends to be very dependent on market confidence, something that can change significantly from day to day. Sentiment towards riskier assets can be particularly fragile during periods of economic uncertainty. So investors in high-risk products should be prepared for their investment’s value to be much more volatile compared to mainstream products.

The lack of regulatory protection

Regulation aims to make sure that consumers are treated fairly when they invest. But many high-risk investments are not regulated by us. So if you invest directly in high-risk investments – such as commodities, student accommodation and crypto (among a range of others) – you are unlikely to have access to regulatory protection from the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service (FOS) if things go wrong.

What the FSCS and FOS do

However, the marketing of crypto is regulated, and you can help protect yourself by recognising regulated crypto marketing.

Whenever you invest in crypto you should see prominent warnings about the risk of losing your money, and you shouldn’t be offered any free gifts to join or bonuses to refer a friend.

If you don’t see these warnings and are offered an incentive to invest it means the company offering your investment isn’t following our rules, and could be illegal, or even a scam. Find out more on scams on our ScamSmart site.

Even with these rules, crypto still remains high risk with no protections if something goes wrong.

Tempted by high-risk investments?

Here are some thingsto remember:

  • High-risk investments may seem more innovative and exciting than the kind of mainstream investments that everybody’s heard about already. However, high returns are by no means guaranteed and in practice they can sometimes produce lower returns than mainstream investments. What’s more, the risk of losing some or even all of your money is very real.
  • High-risk investments are unsuitable for all but experienced investors who fully understand both the risks and the opportunities associated with these investments.
  • You should put no more than 10% of your total net assets in high-risk investments, with the remainder diversified across a range of mainstream investments. Read our article about how diversification can work for your investments.
  • If you do decide to invest in high-risk investments of any kind, either directly or through a specialised fund, you must be prepared to lose all of your investment. And with some high-risk investments, if the worst happenedyou could even end up owing money.
  • When looking at high-risk investments, be especially wary of investment scams. The promise or suggestion of high returns can often be a sign of a scam, particularly if small print is used to try to minimise or hide risks. But some scammers may also list more realistic returns in an effort to seem more legitimate.Our ScamSmart pageexplains the warning signs of an investment scam and how to protect yourself.

Up next

5 questions to ask yourself

Before you invest, ask these questions to make better investment decisions

Read the article

Mainstream investments

Learn about their features and why they might be right for you

Find out more

Should you invest?

Tips on getting your immediate finances in order before you invest

See our tips

Understanding high-risk investments (2024)


Understanding high-risk investments? ›

The Difference Between High- and Low-Risk Investments

Low-risk investments give lower returns, but losses are also rare. High-risk investments have the potential for high returns, but these returns are not guaranteed.

How do you make money with high risk? ›

Some of the best high-risk investments include:
  1. Initial public offerings (IPOs)
  2. Venture capital.
  3. Real estate investment trusts (REITs)
  4. Foreign currencies.
  5. Penny stocks.
Feb 25, 2024

What is the riskiest type of investment? ›

The 10 Riskiest Investments
  1. Options. An option allows a trader to hold a leveraged position in an asset at a lower cost than buying shares of the asset. ...
  2. Futures. ...
  3. Oil and Gas Exploratory Drilling. ...
  4. Limited Partnerships. ...
  5. Penny Stocks. ...
  6. Alternative Investments. ...
  7. High-Yield Bonds. ...
  8. Leveraged ETFs.

Is it better to invest in high risk or low-risk? ›

The Difference Between High- and Low-Risk Investments

Low-risk investments give lower returns, but losses are also rare. High-risk investments have the potential for high returns, but these returns are not guaranteed.

What does a high risk investment portfolio look like? ›

Most sources cite a low-risk portfolio as being made up of 15-40% equities. Medium risk ranges from 40-60%. High risk is generally from 70% upwards. In all cases, the remainder of the portfolio is made up of lower-risk asset classes such as bonds, money market funds, property funds and cash.

What is the safest investment with the highest return? ›

Overview: Best low-risk investments in 2024
  1. High-yield savings accounts. ...
  2. Money market funds. ...
  3. Short-term certificates of deposit. ...
  4. Series I savings bonds. ...
  5. Treasury bills, notes, bonds and TIPS. ...
  6. Corporate bonds. ...
  7. Dividend-paying stocks. ...
  8. Preferred stocks.
Apr 1, 2024

How to double 50k? ›

  1. Open a brokerage account.
  2. Invest in an IRA.
  3. Contribute to an HSA.
  4. Look into a savings account or CD.
  5. Buy mutual funds.
  6. Check out exchange-traded funds.
  7. Purchase I bonds.
  8. Hire a financial planner.
Nov 29, 2023

What are 3 very risky investments? ›

What Are High-Risk Investments? High-risk investments include currency trading, REITs, and initial public offerings (IPOs).

What investment gives you the highest return? ›

The U.S. stock market is considered to offer the highest investment returns over time. Higher returns, however, come with higher risk. Stock prices typically are more volatile than bond prices. Stock prices over shorter time periods are more volatile than stock prices over longer time periods.

Can you lose more than you invest? ›

Technically, yes. You can lose all your money in stocks or any other investment that has some degree of risk. However, this is rare. Even if you only hold one stock that does very poorly, you'll usually retain some residual value.

How much should I put in high-risk investments? ›

High-risk investments are unsuitable for all but experienced investors who fully understand both the risks and the opportunities associated with these investments. You should put no more than 10% of your total net assets in high-risk investments, with the remainder diversified across a range of mainstream investments.

Where is the safest place to put your retirement money? ›

Plenty of safe places exist to put your money as a retiree. If you don't mind keeping it locked up for a specific time period, Treasuries and CDs are great ways to get a competitive return. Bond ETFs work well if you want to invest in a variety of bonds.

What is the best investment right now? ›

11 best investments right now
  • High-yield savings accounts.
  • Certificates of deposit (CDs)
  • Bonds.
  • Money market funds.
  • Mutual funds.
  • Index Funds.
  • Exchange-traded funds.
  • Stocks.
Mar 19, 2024

What is a 70 30 investment strategy? ›

A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.

What is a good asset allocation for a 65 year old? ›

For most retirees, investment advisors recommend low-risk asset allocations around the following proportions: Age 65 – 70: 40% – 50% of your portfolio. Age 70 – 75: 50% – 60% of your portfolio. Age 75+: 60% – 70% of your portfolio, with an emphasis on cash-like products like certificates of deposit.

Which funds have high risk? ›

List of High Risk & High Returns in India sorted by ET Money Ranking
  • Mirae Asset Midcap Fund. EQUITY Mid Cap. ...
  • Kotak Emerging Equity Fund. EQUITY Mid Cap. ...
  • PGIM India Midcap Opportunities Fund. ...
  • Nippon India Small Cap Fund. ...
  • Kotak Small Cap Fund. ...
  • Nippon India Growth Fund. ...
  • Axis Small Cap Fund. ...
  • Invesco India Mid Cap Fund.

What are high risk funds? ›

High-risk mutual funds are those that invest in stocks or equity that have a higher risk of losing value. These funds are also known as equity funds or growth funds. They are designed for investors who are willing to take on more risk in exchange for the potential of higher returns.

How to make money when the market crashes? ›

Another way to make money on a crisis is to bet that one will happen. Short-selling stocks or short equity index futures is one way to profit from a bear market. A short seller borrows shares they don't already own to sell them and, hopefully, repurchase them at a lower price.


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