High-Yield Investments: What Are the Best Options in 2024?

Just type “high-yield investments” into any search engine, and you’ll be taken to a world filled with finance gurus and self-proclaimed experts who, in various ways, promise astronomical profits in no time with zero-risk investments.
But if you're here, you probably already know that high-yield, zero-risk investments don’t exist, that investing is a serious activity, and that you don’t become a financial advisor overnight.

In this article, we’ll try to provide a broad analysis of high-yield financial investments to understand the options available for an investor who wants to learn what to invest in today, for example, in potentially very profitable activities with a risk level that’s directly proportional.

High-Yield Investments: What Does It Mean?

Today, an investor can choose from a wide range of investment products that differ not only by markets and assets involved (stocks, bonds, etc.), but also by the type of yield they can provide and the level of associated risk.

In this sense, high-yield investments represent a vast area traditionally aimed at more experienced investors and those with a high risk tolerance, preferably backed by a substantial amount of capital to invest.

To conduct a serious and structured assessment of this type of investment, it’s worth deepening our understanding of the very definition of "high yield": it's not an absolute value defined a priori, but rather a somewhat arbitrary assessment that depends on various elements that vary based on the individual investor’s profile and the type of product chosen. Put simply, an investment plan with an average annual yield of 2% might be an excellent investment for some, and a poor one for others.

Risk Planning and Assessment

When it comes to investments, risk is an essential element to be seriously considered, and when approaching high-yield investments, this aspect becomes even more critical.

The risk assessment is the starting point of any financial planning as it involves:

• The investor: For each investor, a risk profile is developed, a sort of snapshot that considers not only available assets but also personal characteristics, knowledge of specific topics like financial operations, and the willingness to take risks to potentially increase returns.
• The product: Beyond the general risks that apply to all financial instruments, each product carries specific risks (think, for example, of issuer risk in bonds). These elements together determine the risk class of each product: the higher the value, the higher the potential returns and risks.

To better understand the importance of risk assessment, let’s dive into a practical example of a high-yield financial investment: the Moneyfarm P7 portfolio. This is the most aggressive product we offer, with equity exposure ranging from 75% to 90% and a target volatility of 14%. The returns are quite interesting, even for investments under 50,000 euros, with an average annual yield of 9.2%.

Given these figures, naturally, there is a high-risk profile mainly due to the portfolio composition (mostly equities with exposure to global markets). Therefore, this product is suitable for seasoned investors who can invest substantial amounts for the long term. The longer the time horizon, the more median returns grow, and the probability of loss decreases – it’s not suitable for those new to the market or looking for secure, short-term gains.

Not all investments are suitable for all investors, which is why it’s essential to understand the appropriate risk exposure to avoid unpleasant surprises. As independent advisors, Moneyfarm applies a careful profiling process to each active or potential client to ensure we propose a tailored investment plan for each of them. If you're looking for the right investment for you, explore our offer by filling out the online form without commitment.

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High-Yield Financial Investments: Which Assets to Choose?

Beyond our strategic portfolios, what assets are most suitable for those planning high-yield investments? In the 1990s, there would have been no doubt: real estate, which has traditionally been a safe haven asset characterized by a constant increase in value. But in 2024, it’s difficult to talk about high-yield real estate investments; in most cases, it’s no longer worth investing in real estate, opting instead for more advanced assets. Let’s analyze each to understand their main characteristics and the potential they offer investors.

1. ETFs (Exchange Traded Funds)

ETFs are specific mutual funds (or SICAVs) traded on exchanges like any other stock. The difference is that they are passively managed, meaning they aim to replicate the performance of a particular stock, bond, or sector index, such as commodities. ETFs offer three particularly attractive advantages:

• They guarantee total transparency regarding fund composition, making them an excellent tool for careful diversification;
• They have very low management costs: the TER (Total Expense Ratio) varies from 0.15% to 0.50% depending on the type;
• Since they are traded daily, ETFs are more liquid, making them easier to buy and sell.

It’s no surprise that ETFs are a core component of the Moneyfarm investment strategy: using this type of asset in portfolio construction allows for very satisfactory long-term returns and enables responsible choices from an ESG perspective, which considers environmental issues, social values, and “good governance.”

Here are some of our ETF guides, updated for 2024:

• Oil ETFs
• Lyxor ETFs
• iShares ETFs
• Commodity ETFs
• Renewable Energy ETFs
• Bond ETFs
• Gold ETFs
• Hydrogen ETFs
• Green Economy ETFs
• S&P 500 ETFs
• Coffee ETFs
• Platinum ETFs
• Nickel ETFs
• Water ETFs
• Silver ETFs

2. Cryptocurrencies

Cryptocurrencies are a very unique asset class that has attracted thousands of investors in recent years, partly due to the excitement around the idea of a “virtual currency” that is generated and exchanged exclusively online, using blockchain technology.

In 2017, it was the main topic of conversation, and even now, after a successful end to 2021, cryptocurrencies rightfully hold a place among potential high-yield investments. If you’re wondering whether Bitcoin is for you, be aware that it’s challenging to make a long-term assessment of assets still relatively “new” from a financial perspective. The 2024 cryptocurrency forecasts are promising, but one must not overlook that these assets, contrary to popular belief, are not immune to the volatility of traditional financial markets.

3. Online and Automated Trading

Online trading is often the starting point for people entering the world of investments for the first time, attracted by relatively low costs, ease of participation, and the numerous trading platforms that allow individuals to buy and sell financial securities in just a few clicks from the comfort of their home. While online trading provides the freedom to choose high-yield products, it’s important to acknowledge that 66% of people who engage in online trading lose their money.

A similar argument applies to automated trading, which has become quite popular in recent months. This trend relies on software that, once the parameters of an investment strategy are set, autonomously analyzes data and executes transactions. However, without professionals capable of interpreting market trends beyond data analysis, the chances of profit are drastically reduced (and the risks of loss are increased).

4. Precious and Luxury Goods

When thinking of high-yield investments, luxury goods often come to mind. This global market seems to be less affected by crises and can offer attractive return opportunities. However, success in this field requires in-depth knowledge of the product in question, whether it’s a vintage car or a rare watch. A person with a strong understanding of the product’s market has better tools to evaluate investment opportunities, while someone less informed may face greater risks.

5. Startup Investments

This is among the riskiest types of investments, as it involves companies that may have great potential but no guarantees of success. Many successful brands began as startups funded by early investors who, in some cases, reaped substantial rewards. However, without strategic diversification, these investments can lead to significant losses, especially for investors who focus solely on startups.

6. High-Yield Bonds

High-yield bonds, also known as “High-Yield Bonds”, are fixed-income securities that offer a higher yield than traditional bonds. However, this greater return comes with higher risks, especially for companies with weaker credit profiles. These bonds are often issued by companies in financial difficulty that may offer high interest rates to attract capital.

7. Investing in Amazon Stocks

Amazon, founded by Jeff Bezos, is one of the largest companies globally. Investing in Amazon shares, currently trading above $3,000 per share, can be highly profitable. However, it’s important to remember that Amazon does not distribute dividends to shareholders but reinvests profits in its growth.

Conclusion

We’ve explored the most common assets for high-yield investments. While complex and high-risk, these options can offer substantial returns. At Moneyfarm, thanks to our team of professionals and our Investment Committee experts who continuously monitor portfolio performance, we manage the assets of over 60,000 savers with double-digit annual growth. Discover how to maximize your wealth without compromising security with Moneyfarm's investment strategies.

Frequently Asked Questions

What are high-yield investments?

There is no absolute definition of “high yield”; it depends on factors like the investor’s profile and the product chosen. Generally, they are for experienced traders with a high risk tolerance.

What is meant by risk assessment?

It refers to both the investor’s risk profile and the product's risk level, which is typically proportional to the expected return.

What is Moneyfarm's highest-yielding portfolio?

The P7 portfolio, with an equity exposure between 75% and 90% and an average annual yield of about 9.2%.