Volatility is the rate in which an investment’s value can change in a short period of time. Less volatile investments tend to be safer, but any return you make is likely to be slow. More volatile investments can be riskier as there’s the potential to make a sudden big loss, however there’s also the potential to make a lot of money in a short period of time if you invest at the right time.
Those looking for steady long-term investments should choose less volatile solutions, while those looking for a fast return should choose more volatile options. This post lists 7 popular investments and ranks them by volatility.
When you put your money in a savings account, there is pretty much no risk of losing your money. You are also guaranteed a return in the form of set interest rates. Unfortunately, interest rates are generally very low (usually less than 1.5%), so any return you make will be very slow. It’s the most secure investment, but the worst way to grow your money fast.
Bonds are pretty much loans lent out to a bank, the government or a company. Interest rates of bonds are slightly higher than savings accounts (from around 2 to 5%). Some bonds are slightly riskier than others (such as certain company bonds), but generally government bonds are as secure as savings accounts.
On average, real estate investors make an annual return of about 10%. Renting out property is the most slow and secure option, while flipping property (buying, renovating and selling for a higher value) is a faster option. Real estate does come with its risks and property can fall in value, but your property will usually always be worth something.
Stock prices are generally a bit more volatile than real estate value. That said, it depends on the companies you invest in. Investing in large well-established companies from core industries will usually guarantee you a slow and steady return over the years. However, you can generate a faster return by investing in smaller or more niche companies (although you could also make a loss). A well-chosen mixed portfolio of stocks can earn you a return of about 10% per year.
Forex trading involves buying currencies that are rising in value and then selling them for a profit. The forex market is slightly more volatile than the stock market – investors can use a lot more leverage and fluctuations in value can be more sudden and frequent. Sites like The Forex Library offer tips on forex trading. Successful forex investors can make an annual return of 20% or more!
Gold is one of the most popular precious metals to invest in. Gold prices are known for being quite volatile – while gold holds its value in the long run, you can expect many short term spikes and falls in value. There are some years where gold has appreciated by as much as 30%. This guide at Forbes explains more about investing in gold.
Cryptocurrency rates are some of the hardest to predict – and rises and falls in value can be a lot more sudden than with many other popular investments. It’s possible to make an annual return of about 30% or more, however this typically involves taking a lot of risk. Due to being a relatively recent invention, it is unknown whether crypto can be a secure long-term investment. It is best to build a diverse portfolio to mitigate risk.