High Risk, Moderate Risk and Low Risk Investments

For those looking to invest, you should know that many investments can be categorized as being high risk, moderate risk and low risk. Investing is not difficult, but you should always put lots of thought and planning into it. It is also extremely important to educate yourself about the many different investments available to you so you can find those that fit best with your specific situation and lifestyle. Here are some tips regarding the three categories of investing.

Low Risk Investments

While low risk investments are usually very low key and rarely are extremely glitzy or publicized, they do offer conservative investors a way to save money for the short or long term without the risk involved that you find in other forms of investing. Low risk investments typically pay the lowest yields, but are far less volatile than many other types of investments. Low risk investments include money market funds, certificate of deposits and some types of bonds. Low risk investments are perfect for those that want to make sure there money remains safe and secure. While low risk investments do not offer high returns, they do offer stability and security for those that can not afford to lose money or would just like to avoid as much risk as possible. Expect low risk investments to pay out yields of 1% to 5% annually.

Moderate Risk Investments

Moderate risk investments are perfect for those that are interested in investing for the long term and would like to earn moderate yields. Moderate risk investments are usually certain kinds of stocks, bonds and mutual funds that pay handsomely over the long term. While generally riskier than saving money in a bank, for those that are looking to invest for the long term, historically speaking you will grow your money quite nicely. Moderate risk investments usually use the power of compound interest and time to create a nest egg from 10 to 40 years with regular savings. For instance, saving 1K per year at an interest rate of 10% for 30 years can return close to 200K. Moderate risk investments usually return yields of 5% to 12%.

High Risk Investments

High risk investments are those investments that if you are lucky can return huge yields, however the downturn is that they can be extremely volatile and in many cases instead of getting rich off your investment, you find yourself losing some or all of it. High risk investments include penny stocks, international stocks, some types of Forex trades, etc. The sky is the limit for returns, but many high risk investments- if considered a winner should return yields that range from 10% to 30% ++.



Source by Connie Barker

Pros and Cons of Futures Trading

Futures trading is among today's most highly leveraged, potentially profitable financial pursuits. It allows traders to build up their trading accounts fast with only a small amount of capital at their disposal. However, if you take futures trading lightly, you could also wipe out your trading account in a matter of days. Therefore, it's crucial to your trading success that you diligently educate yourself in futures trading, and trade only with a proven and solid trading strategy.

If you're new to futures trading, it can be especially difficult to decide WHICH contracts to actually trade. There are a lot of options! The best approach would probably be to start with the more popular commodities, until you have a better idea of ​​which contracts most fit you and your trading.

The more you know about the basics of futures contracts and commodities like this, the better your chances of trading success. With any type of online trading, there are a number of factors that you should take into account. Here are four of those factors, along with an assessment of how futures trading measures up:

1.) The Capital Requirements

In order to trade a futures contract, you need to deposit an initial investment into your futures trading account. Currently, brokers require a minimum of $ 5,000, although some brokers are willing to open an account with as little as $ 2,000.

2.) The Leverage

The lease depends on the futures contract you're trading and the contract value. Each contract requires an initial margin. Here are some examples for the most popular contracts (as of January 2008):

E-mini S & P – as low as $ 500 to trade a $ 75,000 contract

(Leverage 1: 150)

E-mini NQ – as low as $ 500 to trade a $ 45,000 contract

(Leverage 1:90)

E-mini Gold – as low as $ 400 to trade a $ 27,000 contract

(Leverage 1: 67.5)

3.) Liquidity

Again, the liquidity depends on the futures contract you are trading. Here are some numbers:

E-mini S & P: around 2,500,000 contracts / day

E-mini NQ: around 500,000 contracts / day

Euro Currency: around 200,000 contract / day

As you can see, the liquidity varies, and there before you MUST check the volume of the futures market you are planning to trade.

4.) Volatility

You will find decent volatility in the futures markets. The high leverage will allow you to make decent profits, even if the markets move just a few points. Here are some average daily moves:

E-mini S & P: between 1% and 3% per day

E-mini NQ: between 1% and 2.5% per day

E-mini Gold: between 1% and 2.5% per day

Euro Currency: between 0.5% and 1.5% per day

Keep in mind that these moves represent approximately $ 500- $ 1,500 per day for each contract traded.

Conclusion:

Futures markets can be very liquid, and the capital requirements are as low as $ 2,000. The leverage is at least 1:50, and there's decent volatility.

Futures markets are regulated and the spread is typically 1 tick (minimum movement of the contract). Commissions are usually below $ 5 per transaction. It's no surprise that many day traders choose the futures market for their trading endeavors.



Source by Markus Heitkoetter