What you should know about High Risk, High Return stocks

When talking about one term investors always hear is High Risk, High Return refers to the relationship between risk and return on investment. By the word risk (Risk) is uncertainty, which means that it is something that investors cannot predict.

 

In theory, investment risk means that the actual rate of return an investor receives will fluctuate or differ from the expected rate of return which may receive higher or lower returns. The return on investment will be related in the same direction as the risk, that is, if the rate of return on investment is high. The level of risk that must be taken from the investment will also be high.

 

As for the High Risk, High Return stocks, most stock price fluctuations are higher than the market. For example, stock XYZ has a beta of 2x, meaning that if the overall stock market changes 10%, stock XYZ's price will go up or down by 20%. of the stock price, which one is more / less risky. A low beta means the stock price is less volatile than the overall market while a high beta means the stock price is more volatile than the overall market.)

 

High-risk, high-return stocks tend to be stocks with rapid price reversals. After having declined or remained at a low level for a long time (Turnaround Stock), for example, the operating performance changed from a loss to a profit. And when it is profitable, it will continue to grow. But on the other hand, if this stock is expected to change in a good way. But the results are not as expected, such as continuous operating losses. Investors sell stocks quickly and share prices drop sharply.

In addition, high-risk, high-return stocks are often stocks that investors come to invest for speculation. Because I received information that the business is getting positive results, causing the performance to grow. The share price rose sharply. But if the information that comes out is not true or the company's management has denied about such information. The share price will drop sharply.


In addition, High Risk, High Return stocks may be cyclical stocks because certain industries such as oil, petrochemicals, agricultural products, steel have higher price movements than the overall industry or the overall economy. Because the cyclical industry has a long-term uptrend or downtrend for quite a long time, so this type of stock, in addition to the stock price, has a high volatility. Product prices are also highly volatile


Investment strategy

By nature, the stock market is already very risky. Investors need to mitigate risks. Initially, the information about the industry should be studied in depth. At the same time, one must understand whether the industrial cycle is in an uptrend or a downtrend. Study the fundamentals of that business. And before making an investment decision, always assess the true value.

 

 

High Risk, High Return Stock Investment Strategy

1. Have knowledge and understand business and industry because if not accurate. The chance of loss is very high and should not invest according to the trend without studying the information

2. To be a quick decision maker, it is important to have discipline in cutting losses when you know you invest in the wrong way (Cut Loss).

3. There must always be a level of take profit (Take Profit), for example, if the price increases by 10% from the purchase price, it will immediately take profit.

4. It must have basic knowledge of technical analysis because stock prices are often driven by technical factors such as technical tools, a trend line is a line that shows the direction of a stock moving in a certain way. According to that trend, it makes you know the trend of stock prices in the future, or MACD, which is a tool that moves in the same direction as the stock price and can measure whether the stock is in an uptrend or downtrend, etc.

 

If investors are interested in investing in High Risk, High Return stocks, in addition to understanding the industry must understand the risks Because of this type of stock, the important part is that if there is a mistake, it will lose. the more wrong the more the loss Therefore, you must have discipline to cut losses when you know you invest in the wrong way (Cut Loss). Therefore, this type of stock is suitable for investors who closely monitor stocks. review business information Knowledge and expertise in that business industry as well.

 

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