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Best High Risk Investments UK to Watch

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In this guide, we explore high risk investments in the UK. We also discuss UK brokers to buy high risk investments and how you can get started with an account today.

5 Popular High Risk Investments

Here’s a list of five popular high risk investments in 2022 to watch.

  1. Bitcoin
  2. EasyJet
  3. Rolls Royce
  4. Vanguard Emerging Markets Stock ETF
  5. Cineworld

High Risk Investments in the UK

Each asset class comes with a different level of risk and potential yield, so spend some time thinking about what your financial goals are before taking the plunge.

1. Bitcoin

Bitcoin is the world’s first cryptocurrency and still leads the way in terms is mass awareness, valuation, and real-world usage. To give you some perspective of how rapidly this digital currency has grown, Bitcoin was worth less than a fraction of $0.01 when it was first launched in 2009. Just 9 years later in 2017 – the very same Bitcoin would have cost you $20,000.

The cryptocurrency has since tailed-off in terms of pricing – even hitting lows of $3,000 along the way. With that said, as of November 2020 Bitcoin is valued at around $13,500. Comparing this to its price back in 2009, this represents an unprecedented increase of almost 135 million percent.

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It is also important for us to note that a lot of UK investors avoid Bitcoin because they are worried about the safety of their investment.

2. EasyJet

While there are several industries that have been hit particularly hard by the pandemic – none have been quite as disastrous as the airline arena. First, passenger numbers were dropping off anyway as the fears of the virus began to grow in early 2020. Then, as more and more governments around the world implemented entry restrictions, airlines were forced to ground their planes for months on end.

easyjet share price

Secondly, you need to assess whether or not your chosen airline has the financial means to see itself through the current economic climate. After all, although planes are once again back in the air, passenger numbers are still at record lows.

This is why airline stocks sit well within the scope of a high risk investment. In terms of choosing which airline stock to invest in, there are many options are on the table. With that said, we are inclined to stock with budget airline EasyJet. Before we get to the specifics, let’s have a look at the firm’s stock price action. At the start of the year, EasyJet shares were priced at 1,430p.

Fast forward to November 2020 and the same shares are worth just 487p. This represents a 10-month decline of 65%. But, before the pandemic came to fruition, EasyJet shares were actually on a run. For example, back in August 2019, the stocks were priced at 887p.

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3. Rolls Royce

In the 24 hours prior to writing this article, Rolls Royce shares increased by almost 220%. In the 24 hours prior to that, the shares crashed by over 60%. Regarding the 60% drop, this was large because management at Rolls Royce initiated a £6 billion share issue. As such, those currently in possession of stocks were heavily diluted.

Rolls Royce share price

At the time of writing, the same shares will cost you just 82p. This translates into a 12-month decline of 95%. To put that into perspective, had you invested £10,00 into Rolls Royce shares 1-year ago, your investment would be worth just £500.

Contrarians, on the other hand, will look at this and question whether Rolls Royce is still a growing concern. As such, we need to look at the fundamentals. We should note that much of Rolls Royce’s business model centres on its high-grade engines. It supplies many of these engines to the airline industry.

This is once again a prime example of how the pandemic has resulted in a ‘dominos’ effect. In other words, as demand for air travel has plummeted, as have the engines that Rolls Royce is so famous for manufacturing. So, taking this lack of demand into account and the pressures it has had on free cash flows, this forced Rolls Royce to issue £2 billion worth of equity.

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4. Vanguard Emerging Markets Stock ETF

The Vanguard Emerging Markets Stock ETF will buy and sell shares on your behalf. As such, you will benefit from a high risk investment stream that is 100% passive.

Vanguard Emerging Markets Stock ETF

This ETF will give you instant access to over 5,000 stocks. 44% of your portfolio will be directed to Chinese stocks, 16% to Taiwan, and 10% to India. Other countries include Russia, Mexico, the Philippines, Malaysia, South Africa, Brazil, and Indonesia.

To give you an idea of some of the stocks that you will be investing in with the Vanguard Emerging Markets Stock ETF, check out the list below:

  • Alibaba Group Holding Ltd.
  • Tencent Holdings Ltd.
  • Taiwan Semiconductor Manufacturing Co. Ltd.
  • Meituan Dianping
  • Reliance Industries Ltd.
  • Naspers Ltd.
  • JD.com Inc.
  • Ping An Insurance Group Co. of China Ltd.
  • China Construction Bank Corp.
  • Infosys Ltd.

As you might have guessed, being able to access companies such as those listed above is not a simple process for UK retail clients. In terms of performance, this high risk investment has yielded almost 10% over the past 12 months.

Vanguard Emerging Markets Stock Index

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5. Cineworld

In a similar nature to pubs, hotels, restaurants, and gyms – cinemas in the UK were put under severe financial pressures during the lockdown. At the forefront of this is Cineworld – the UK’s largest cinema chain with over 120 sites. All in all, Cineworld stockholders have had a torrid time in 2020 – more so than many shares listed on the London Stock Exchange.

For example, the stocks started the year at 220p each. In November, the same shares are worth just 24p – giving Cineworld a market capitalization of just £333 million. As such, the shares have lost 89% in valuation in just over 10 months of trading. The main concern here is not whether UK cinemas will one day return to pre-covid levels.

Cineworld share price

This may be more of a probability than a possibility. The key problem is when. Like all sectors trying to battle their way through the wider impact of the virus, Cineworld can’t survive forever. After all, it still has liabilities that it needs to service. With incoming cash flows at record lows, this is becoming more and more challenging.

This is especially the case when you consider that the firm has net debt of over $8 billion. In its recently published half-year results, Cineworld noted that it had enough cash to see it through the next year. In addition to this, its creditors have agreed to work alongside the cinema group, albeit, it remains to be seen for how long.

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Platforms Offering High Risk Investments

Not only do you need to spend ample time researching high risk investments for your personal financial goals, but you also need to find a brokerage site.

Check the below list of UK stock brokers to buy high risk investments.

1. eToro

eToro is an option on the table if you’re based in the UK and looking to buy high risk, high-yield investments online. The broker does not charge stamp duty fees, nor will need to pay a monthly dealing fee. Instead, eToro makes its money from the 0.5% deposit fee it charges.

After that, you will have unfettered access to heaps of assets – many of which are classed as high risk investments. In fact, all five high risk investments that we have discussed today are available on the eToro platform. For example, you can buy and sell over 16 cryptocurrencies – including Bitcoin, invest in Ripple, and Ethereum. Or, you can invest in high yield ETFs that track emerging market stocks and corporate bonds, and even real estate. Other asset classes at eToro include indices, forex, and commodities.

The eToro Copy Trading feature, for example, allows you to choose an expert trader that you like the look of. Then, you can elect to copy all of their ongoing trades. Or, you can try the CopyPortfolio feature, which allows you to diversify across heaps of different eToro traders and even specific sectors like tech and retail.

In terms of minimums, eToro allows you to invest from just $10 when buying stocks and ETFs. You will, however, need to deposit at least $10 to get started. You can do this by using your everyday debit or credit card, and even an e-wallet such as PayPal and Skrill. In terms of safety, eToro is regulated by the FCA and your funds are protected by the FSCS (up to £85,000).

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2. IG

The broker – which was launched in 1974, is a public company listed on the London Stock Exchange. With a full host of regulatory licenses under its belt – including that of the FCA and a partnership with the FSCS, you can invest at IG without needing to worry about the security of your funds. Nevertheless, you will have access to over 12,000 assets here.

This includes a huge selection of the UK and international stocks, ETFs, mutual funds, and even investment trusts. With so many assets available, it goes without saying that you have heaps of high risk investments to choose from. For example, you can buy AIM shares, foreign-listed equities, and even trade CFDs. You can also access the cryptocurrency markets, apply leverage, and engage in short-selling.

If opting for the traditional share dealing side of IG, you will be charged a fee of £8 per trade.  If you trade regularly at IG, the £8 fee is reduced to just £3. Additionally, you also have the option of placing your high risk investments into a Stocks and Shares ISA.

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What are High Risk Investments?

Puts simply, a high risk investment is one that carries an above-average chance of loss. In other words, the ‘risk vs reward’ spectrum is much higher than traditional assets and low risk investments. This means that while you stand the chance of making higher returns, you also face a chance of losing money.

To give you an idea of some high risk investments available in the UK, check out the list below.

  • Emerging market stocks
  • Emerging market bonds
  • Low-grade corporate bonds
  • Cryptocurrencies
  • Peer-to-peer lending
  • Mortgage-backed securities
  • Derivatives and leveraged assets
  • Commodities
  • Penny stocks
  • IPOs
  • Stocks with weak balance sheets
  • Exotic forex pairs
  • Venture capital funds
  • And many more

Fundamentals of High Risk Investments

With so many high risk types of investments available to UK traders, knowing which assets to add to your portfolio can be challenging. After all, you’re not investing in blue-chip stocks like Apple, Amazon, or IBM.

On the contrary, you are investing in an asset that has a much higher chance of losing your money. This is why the research process is absolutely crucial when it comes to making investment decisions.

Here’s what you need to know before taking the plunge with your chosen UK high risk investments.

Diversification

Creating a diversified portfolio is one way to limit your risks by some distance.

For example, let’s suppose that you have £10,000 to invest in the financial markets. Of this figure, you want to allocate 5% to high risk investments – which amounts to £500 of your available capital. An inexperienced investor might decide to use the entire £500 into one high risk asset class like Bitcoin or EasyJet shares.

diversification chart

On the other hand, a seasoned investor with a firm understanding of diversification will look to split that £500 across as many high risk investments as possible.

COV-19 Consequences

As have discussed throughout this guide on UK high risk investments, the coronavirus pandemic has had a major impact on the value of many assets.

You need to evaluate is whether or not the company in question has the financial means to get through the pandemic until some sort of normality resumes. This doesn’t necessarily need to be in the form of its cash reserves per se – as some companies have been able to raise sufficient levels of credit.

How Liquid is the Investment?

If a high risk investment is ‘liquid’, this means that you can sell it for cash. For example, the likes of stocks and ETFs have high liquidity levels, as you can exit your position at any given time during normal market hours. This is also the case of cryptocurrencies.

On the other hand, the likes of bonds are not so liquid, are you typically need to wait until they mature to receive your original investment back. All of the high risk investments discussed on this page are liquid.

Conclusion

In summary, while high risk investments do give you the chance to chase returns, you do need to ensure that you have a firm understanding of the additional risk that this represents.

FAQs

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Kane Pepi author check sign Pro Investor

Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner. Academically, Kane holds a Bachelor’s Degree in Finance, a Master’s Degree in Financial Crime, and he is currently engaged in a Doctorate Degree researching the money laundering threats of the blockchain economy. Kane is also behind peer-reviewed publications - which includes an in-depth study into the relationship between money laundering and UK bookmakers. You will also find Kane’s material at websites such as MoneyCheck, the Motley Fool, InsideBitcoins, Blockonomi, Learnbonds, and the Malta Association of Compliance Officers.

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