High-risk investments UK

As the name suggests, high-risk investments can yield higher returns than other investments, but they also come with higher risk. This guide looks at the characteristics of high-risk investments, the different types of high-risk investments, and the pros and cons vs mainstream investments.

While high-risk investments promise high returns if successful, there is no guarantee that the investments will actually deliver those returns. With high-risk investments, you should be willing to accept the risk of losing some, or all of your money.

What’s more, it can be harder to access your money if you need to, as high-risk investments usually offer lower levels of liquidity than other investments. Moreover, high-risk investments can be prone to market volatility, which can lead to rapid and unpredictable price movements.

Many high-risk and high-return investments, for example cryptocurrencies, are not regulated, so you will not be protected by the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service (FOS) if things go wrong. This lack of oversight can expose investors to fraud, scams, or other unethical practices.

The attraction of high-risk investments is the potential for substantial returns. Whether it's investing in volatile stocks, startups, or alternative assets, the chance to earn significant profits can be a powerful motivator. High-risk investments are also associated with innovative sectors and emerging industries, and some offer tax incentives to investors.

However, high-risk investments are only suitable for experienced investors who are prepared to lose all of their investment. The returns are in no way guaranteed and there is a very real risk that you could lose your money. Ultimately, while the potential rewards may be tempting, it's important to approach high-risk investments with caution and a clear understanding of the associated pros and cons.

If you are going to invest in high-risk investments, it’s recommended that you put a maximum of 10% of your total net assets in high-risk investments, with the rest diversified across a range of mainstream investments. It is also important to be wary of investment scams, as some high-risk investments operate in regulatory grey areas.