What is the Risk/Growth Bucket?. Higher risk investments. Low Risk = . L. ow Reward; High Risk = High Reward. Must be willing to risk losing a portion of your money to be able to make gains from your investments. ID: 713387
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What is the Risk/Growth Bucket?
Higher risk investments
Low Risk =
Low Reward; High Risk = High RewardMust be willing to risk losing a portion of your money to be able to make gains from your investmentsNot guaranteed that you will make moneyNot guaranteed that you will lose moneyThere is no limit to how much you can make from these investmentsInvestments options in the Risk/Growth Bucket include:EquitiesHigh-Yield BondsReal EstateCommoditiesCurrenciesCollectiblesStructured NotesSlide3
Equities: Basic term that includes stocks, mutual funds, indexes, and exchange-traded funds (ETFs)
Built like mutual funds or index funds in the sense that they contain a collection of assetsCan be traded just like individual stocksUnlike mutual funds or indexes, they can be traded throughout the day– don’t have to wait until the end of the trading dayWhen you buy an ETF, you are not buying actual stocks, bonds, commodities, etc. but are buying shares in an investment fund that owns those assetsWhen you buy an ETF, the company promises that you’ll receive the same outcome as if you’d owned them yourselfLots of diversity at a low costSlide4
AKA “Junk Bonds”
Bonds with low safety ratings but have a high interest rate
Higher risk of the bond is compensated by providing a higher rate of returnGenerally, these bonds have ratings lower than BBB and are sometimes called “subinvestment grade”Slide5
Many ways to invest in real estate:
buy a home and rent it out for income“Flipping”- buy a property, fix it up and then sell it at a higher price than you bought itYou can personally engage in fixing the house or you can pay other people to do it for you Note: In order to make money off of the investment, you must be the one buying the houseCommercial Real Estate/Apartment- similar to renting but instead of a house you buy a condo, townhouse, apartment, etc. and rent it out
nvestment Trusts (REITs)-
trusts (holding companies) that have ownership in commercial properties and sell shares to small investors
Trade like stocks
Can buy shares of a REIT index fund which gives you a diversity of many different REITs
When buying real estate that has income associated with it (rental, condo, apartment, etc.) you have two ways of making money: money coming from renters and, if the property increases in value, you can sell it for the appreciated amountSlide6
Raw materials that can be bought and sold
Includes gold, silver, oil, coffee, cotton, orange juice, livestock, soybeans, etc.
Investing in precious metals like gold and silver are a common way of protecting against uncertaintyUsed to protect against inflation or currency devaluationMany times you have to buy commodity “futures” meaning that you make the commitment to hold onto the commodity for a specific interval before selling itDuring that time the commodity can either go up or down in value once that interval is up, the commodity is sold regardless of what happened to its valueCan also buy “options” which are like futures but limit your lossPerhaps the safest way to invest in commodities is through ETFs, but the potential upside is not as highSlide7
Trading one standard of money for another
Also known as “forex trading”
Ex: Trading U.S. dollars for EurosTransactions can be opened and closed instantly at the exact price shown and generally with no commissions or transaction feesThe market is so large that it is harder for people to manipulate the prices of currenciesCurrency prices largely based on supply and demandMarket is open 24/7 so you can make trades whenever you wantCurrency trading is very risky and should only be done by more experienced investorsTo learn more about trading currencies, Investopedia has a “forex tutorial” that will teach you how trade in the forex marketSlide8
Anything that has a specific, niche market
Ex: Art, wine, coins, cars, antiques, etc.
To invest in collectibles, it takes significant insight and knowledge of the market to be able to make highly profitable investmentsOne trick that some use is to just compare their product to others found on eBay or other sites people buy and sell itemsAnother tips is to find an expert who can provide you with an accurate appraisalInvesting in collectibles think “Pawn Stars”Slide9
As you may recall, structured notes were also included in the Security Bucket
That’s because there are different types of structured notes
Some have 100% protection, so they belong in the Security Bucket, assuming the bank you are getting them from is financially solidOther kinds of notes give you higher potential returns, but only for partial protection if the index decreases in valueEx: A note with 25% protection will protect you if the market drops 25%, but if it drops 35% you lose 10%Some structured notes even pay you for owning them by providing 150% upside, meaning that if the market goes up 10%, you will receive a 15% returnThese types of structured notes provide you with higher upside but at the tradeoff of less protectionSlide10
While some of these investments may be more appealing than others, it is essential that you diversify
Don’t put all your eggs in one basket as it could completely destroy all of your investments
An example of diversifying your Risk/Growth Bucket would be:Stocks: buy shares of companies in different industriesEnergy, technology, retail, finance, entertainment, etc.Real Estate: flip houses in different neighborhoods or in different states depending on how the housing markets are in those areas; or buy different REITs with holdings in nursing homes, condos, luxury apartments, etc.Look for places with good housing marketsCommodities: buy gold, silver, platinum, oil, coffee, cotton, etc.Slide11
Equities (stocks, mutual funds, indexes, ETFs)
High-Yield Bonds (higher risk but higher interest rates)
Real Estate (renting, flipping, REITs)Commodities (gold, silver, oil, livestock, “futures” and “options”)Currencies (trading $ for Euros)Collectibles (art, coins, cars, antiques)Structured Notes (more upside but without the downside protection)Most Importantly: Diversify!Slide12
Learn about how to allocate your money across the Security and Risk/Growth Buckets!
Maximize your money-making potential while protecting yourself from market downsides!
Investment strategies of the rich and famous!Slide13
Tony Robbins’ Money: Master the Game