Arguably, the global recession has made investing in the various financial markets seem like a higher risk activity because of the economic problems that led to it. You will hear about huge buyouts, real estate busts, and double-digit hedge fund returns. However, in all economic conditions good deals with potential for high returns are available. For those investors who are willing to take on more risk for higher rewards we will discuss three high return investments.
Real Estate Speculation
Don't let the widespread foreclosures in real estate fool you into thinking that speculation is a goner. If anything, the recession has made property purchase more desirable since you can get deals at rock-bottom prices with the expectation of selling for a profit in the future. Of course, the risks are higher since the time when the real estate industry will bounce back is still up in the air. But eventually an uptrend in real estate will return. The challenge is in buying properties at deep discounts at either a short sale or a foreclosure, renting it out and biding your time while the market returns. Over the long-term this strategy could yield greater returns than trading stock indexes.
In many ways, investing in hedge funds is similar to being a member of a glorified investment club since they have limited regulations imposed by any government agency. This is different from mutual funds, which are strictly regulated by the SEC.
Hedge fund investments can run the gamut from specialized to broad investment areas commodities, stocks, buyouts and real estate. The profits can be magnified in a recession, with some hedge funds at investment banks like Goldman Sachs reporting record double-digit returns after fees. Of course, there are risks associated with them where you can some really bad quarters that will decimate your portfolio. But during the downturn, hedge funds make a killing because they usually have large amounts of capital at hand and there are plenty of deals available. Another advantage of hedge funds is that they have favorable tax implications.
Emerging Market Investments
As much as real estate speculation and hedge funds are great investments, emerging markets are even better. Basically, emerging markets are the economies of foreign countries which are growing rapidly.
Their governments are anxious to offer a favorable investment climate - volatile growth rates and better investment returns - to attract investment capital into the country.