Investments are a great way to grow your personal wealth – but one important aspect to understand is risk – the chance that you may lose money.
Medium-risk investments strike a balance between the potentially high returns of aggressive investments and the stability of low-risk ones.
They offer a ‘best of both worlds’ approach. Although they may not have the stability of savings accounts/ ISAs or ETFs, they’re worth considering as they offer the opportunity to earn impressive returns.
But what are some of the best medium or moderate-risk investments? That’s what we’ll be exploring today. Read on for some of the best medium-risk investments for your portfolio.
What is a Medium-Risk Investment?
A medium-risk investment offers a balanced approach to investing, falling between low-risk and higher-risk assets.
Unlike high-risk ventures that can be volatile and low-risk choices that provide stability but limited growth, medium-risk investments are the ideal combination of both.
These investments, such as dividend-paying stocks, corporate bonds, and peer-to-peer lending, have the potential to deliver moderate returns without extreme market fluctuations.
If you’re considering investing, be sure to understand your risk tolerance and investment goals to ensure that your investment of choice aligns with your financial journey.
Top 5 Moderate-Risk Investments
Here are some of the most popular medium-risk investments and how they may fit into your financial portfolio, from the stock market to the world of art investment.
First of all, it’s important to note that stocks can vary widely in terms of risk. Some stocks are highly volatile, but others can be a much more stable option. Dividend-paying stocks are considered a more stable option.
These are shares of companies that distribute a portion of their profits to shareholders in the form of dividends. This can be a great way to earn monthly income. Whether you’re looking for capital appreciation, steady cash flow or both, it could be worth exploring dividend-paying stocks as a medium-risk investment.
Next, we have peer-to-peer lending. This investment avenue has rocketed in popularity in recent years – it can make a great alternative investment if you’re seeking medium risk.
Peer-to-peer lending is when you lend money directly to individuals or small businesses through online platforms. You can earn interest on their loans, potentially achieving higher returns compared to traditional savings accounts.
However, it’s essential to be aware of the associated risks, including the possibility of borrowers defaulting on their loans. It’s also important to consider the interest rates, as this will determine the amount of profit you’ll earn through peer-to-peer lending.
Corporate bonds can be a great option if you’re looking for a moderate-risk investment. When you purchase a corporate bond, you are essentially lending money to the issuing company in exchange for regular interest payments and the return of the principal amount at maturity.
While corporate bonds carry some risk, they are generally considered more predictable than stocks, making them a suitable option for medium-risk investors.
Wealth management involves hiring professionals to manage your investment portfolio on your behalf. These experts analyse market data, trends, and risk factors to make informed decisions about how to allocate your funds.
Hiring wealth management experts can be expensive – however, it can be a great resource if you don’t have the time or expertise to manage your investments yourself. This can provide a diversified approach to investing, which is a great way to mitigate risk.
Fine Art Investment
Finally, we have art investment. Although some art investments are considered low-risk investments, there are several medium to high-risk investments on the art market.
Art investment is a unique and rewarding alternative investment. First of all, art is a tangible investment that you can enjoy without worrying about impacting your return on investment.
Historically, fine art has shown the potential for appreciation over time. It has stood tall against times of economic uncertainty and can make a great hedge against inflation. Investing in art in times of recession may be a great choice.
That being said, it’s important to note that not all pieces of art will increase in value over time, and some pieces may even decrease in value. This is why art can be a medium-risk investment. For example, investing in up-and-coming or new artists can be very rewarding, but it can also be risky.
If you’re looking for a safer, low-risk option when investing in art, we recommend exploring blue-chip art. Blue-chip art is created by artists with a history of creating art that either maintains its value or increases in value over time – artists such as Banksy, Warhol and Picasso.
As with any investment, we recommend liaising with an expert. Art advisors can help you to make an informed choice when it comes to investing in art.
If you’re unsure where to begin, you can invest in art through our London-based art gallery. Our experts can help you to generate returns of up to 12% per year.
Are Medium Risk Investments for Me?
There are many benefits to investments – but are medium-risk investments right for you? When choosing the right avenue, consider your financial goals. Are you looking for long-term growth, regular income, or a combination of both?
There are different investments available that suit different goals, so be sure to have a clear understanding of your ambitions when investing.
It’s equally important to assess your risk tolerance. A medium-risk investment portfolio is designed to provide a balance between risk and return, but there is still the potential for fluctuations in value. Consider how comfortable you are with the possibility of temporary market downturns.
Spreading your investments across different asset classes can help manage risk. This is known as diversifying your portfolio. Consider building a diversified portfolio that includes a combination of stocks, bonds, and alternative investments such as art to reduce the overall risk profile.
Be sure to consider whether you’re looking for a short-term investment or a long-term investment. Your investment time horizon is the length of time you expect to hold your investments before needing to access the funds.
Medium-risk investments are generally better suited if you’re looking for a medium to long-term time horizon. This is because they tend to allow potential market fluctuations to smooth out over time.