A high yield investment is one that provides an above average rate of return. There are three different ways to find a high yield investment: venture capital, angel investing and stock or commodity futures. It is important to note that only risk capital should be used for high yield investments. Risk capital is money that is available for investing and is not required for any other purpose. This is essentially money that you can afford to lose, without causing a financial hardship.
The level of risk associated with an investment increases proportionally with the amount of the yield. High yield investments have a greater degree of risk. The reason for this is simple to understand.
The return on the investment is the reward for taking the risk to invest funds in a venture that may or may not succeed. Be wary of any investment firm that promises a higher than average rate of return, as you can only assume that all the investments are high risk.
Venture capital is a process when an investor provides a specific amount of cash to a business. The purpose of this type of high yield investment is to invest in the growth of the company or the launch of a product. The yield or rate of return on these investments is higher than a standard investment due to the degree of risk. The contract with the company provides the specific rate, the time frame for repayment of the loan and a guarantee from the loan recipient.
Angel investing is a type of high yield investment where the investor provides a significant amount of cash financing in return for a share in the profits of the business. These types of investments are similar to venture capital in their degree of risk, but have a different payment option. The level of involvement and time required is also very different.
Instead of a specific cash payment within a predefined period, the angel investor has an ownership stake in the firm. They have the right to assist in the decision making for the firm and take a portion of the profits. Should the business be unsustainable, they have the right to buy out the other stakeholders and operate the business themselves.
A stock or commodity future is a financial instrument based on estimating the value of a stock or commodity before trading on the open market has begun. The values are set before the market is opened and payout is based on the value of the stock or commodity at the end of the day. This is a high-risk investment method that can be impacted by a wide range of items in the course of a day.