- July 25, 2018
- Posted by: Ethica Private Wealth
- Category: Blog
A crucial component of proper wealth management is understanding how and when to invest your money. Investment can help to safeguard your wealth against inflation and boost your retirement savings pot, but it isn’t without its own set of disadvantages.
Investment carries numerous risks, and nobody can guarantee that an investment won’t lead to monetary loss, but a good investment advisor should be able to help you to minimize these risks and make sensible, informed decisions about the best way to invest your money.
However, once in a while, certain ‘hot investments’ hit the headlines. These are opportunities that you might hear friends or family talking about. You might even hear people refer to them as if they’re guaranteed to bring you a profit.
Unfortunately, this often isn’t true as all investments carry a certain degree of risk. The best investment portfolios are those that have been carefully considered and designed to reduce this risk to acceptable levels.
Here are 3 investment opportunities that may carry considerable risk, and therefore should be properly considered before you make any decisions to invest.
In recent years, many people have opted to make investment decisions themselves, without consulting advisors, by investing in ‘cryptocurrencies’ – a market that has seen exponential growth in recent years. It’s this very growth that has attracted so many beginners to the market and encouraged them to take risks for fear of missing out on the chance to reap hefty returns.
Indeed, this has paid off for many early adopters, as in 2017 alone the total cryptocurrency market capitalization grew by over 1,600%. But was this just mere luck in an otherwise risky and irresponsible investment strategy? Or are cryptocurrencies really worth investing in? And if so, is it too late to begin investing?
Well, nobody can say for certain. The market has been historically volatile, and there are too many unknowns to say with any degree of certainty how things will progress from here.
Cryptocurrencies are digital currencies that usually run on a piece of technology known as ‘blockchain’ – a distributed digital ledger. They allow users to transact directly without a third party, such as a bank. Being a form of currency, there’s always the risk that governmental regulation will limit their use in the future and cause the price of cryptocurrencies to dramatically decline.
There has also been speculation that the price explosion in the cryptocurrency market is a result of a speculative bubble which may eventually pop. All of this is speculation, but the evidence suggests that cryptocurrency prices are highly volatile, and investors may benefit from extra caution when considering investing.
Facebook is a brand name that will by now be familiar to the vast majority of people in Australia. It’s been one of the most successful social media platforms out there and is still being used today, despite competition from newer social media platforms like Twitter and Instagram.
Recently, however, Facebook has faced controversy in recent years due to the Cambridge Analytica scandal, in which it was alleged that user data was improperly used in an election campaign to build voter profiles. This lead to a drop in the value of Facebook’s stock.
This lower stock pricing may be tempting for some investors who want to take advantage of the opportunity to buy low and sell high, but it may also be a risky strategy. This is because, as a result of the controversy surrounding the scandal, it’s possible that Facebook will be subject to regulatory changes which may significantly affect its business model or profitability.
This is by no means clear, but, as with any investment, it’s important to exercise caution and make sure you’re thoroughly clear on the risks and rewards before making any decisions.
3. Bluebird Bio
This is a company that develops gene therapies. Gene therapy is a hot topic in the medical field and amongst investors. As the name suggests, it involves modifying patients’ genes in order to treat disease.
People have been experimenting with gene therapy for decades, but many investors have been suspicious about its usefulness and for many years it seemed that the technology had a long way to go. However, investors that want to get in early in the hope of buying whilst the prices are still low might be tempted by new inspiring results as gene therapy technology moves forward.
Bluebird Bio have recently developed therapies which have seen some success in clinical trials. In certain cases, their course of treatments has seemed to completely cure symptoms of serious genetic conditions.
This might all seem well and good, and investors may be tempted by the prices of their stock, but there are no guarantees that you will see a return on your investment. Bluebird – or any other biotech company, for that matter – could potentially suffer setbacks in clinical trials or face other challenges that cause prices to fall.
So What Should I Invest In?
There is no one-size-fits-all answer to the above question. Proper investment planning needs to be carefully considered and must take into account your personal circumstances and finances. There are many different investment strategies that need to be considered, such as diversification strategies and dollar cost averaging.
This is a lot to tackle on your own, and without the requisite training, qualifications and experience, you may not be able to make informed decisions. Therefore, it’s usually a good idea to consult a qualified investment advisor who will take the time to understand your whole financial picture and advise you on the best places to use your money.
Here at Ethica, we have a team of private wealth specialists that are well-versed in gaining favourable returns on your investments. One of the professionals on our team will be happy to discuss your goals and help you to get started. Click here to book your free consultation today.