Understanding High Investment Returns
When it comes to investments, high returns are generally considered to be those that exceed the market average. There are a range of factors that can affect investment returns, including the different asset classes being invested in, the level of risk involved, and the economic climate. Some investment products that often generate higher returns include growth stocks, real estate, and venture capital. Savings accounts can also generate higher returns in line with rising interest rates.
Although investors may be tempted by high yield investments, they typically carry greater levels of risk. Before choosing an investment based on the potential for high returns, you must consider all variables and make sure the risks are manageable in relation to your investment goals. The key to achieving high returns is understanding which types of investments fit your financial situation, time frame and risk tolerance.
What is a high yield investment?
High yield investments are those that produce significant revenue for investors, either through interest payments or capital growth. High returns tend to be associated with riskier investments, since investors are taking on a greater degree of uncertainty in exchange for higher expected profits. However, relatively low-risk investments can also yield impressive returns over time, such as a high interest savings account.
The different types of investments that may offer a high return include:
Shares
When you buy shares (also known as stocks, securities or equities) in a company, you become a part-owner. The value of your investment will increase as the value of the company grows. As a shareholder, you may also be paid dividends from the company’s profits. Stock market trading can allow you to build your wealth over time, however if the share price falls then your investment will lose value.
Managed Funds
In a managed fund, your money is pooled together with other investors and then invested by a professional fund manager on your behalf. Each managed fund has its own investment strategy which determines the different asset classes the fund invests in, the level of risk to investors, and the expected returns.
Exchange Traded Funds
ETFs are a type of managed fund that can be bought and sold on the stock exchange. They are designed to track the performance of a particular asset or market index, such as stocks, bonds, commodities, or currencies. Most ETFs are passive investments that don’t try to outperform the market which means the value goes up or down with the index or asset they’re tracking.
Mortgage Funds
A type of managed fund that finances mortgage loans. The investment manager uses their expertise to find the best mortgage opportunities on behalf of investors, who make a return through the interest and fees of the loans. Higher returns are typically achieved by taking on riskier second mortgages.
Peer to Peer Lending
This is a form of alternative financing that allows investors and borrowers to connect directly with each other in an online marketplace. With P2P lending, all the lending risk is taken by investors. If the borrower on a particular loan does not pay their interest on their loan on time, the investor may not get paid their interest until later. These unsecured loans offer higher yields due to the higher risks.
Venture Capital
Venture capital is a type of investment fund used to support the development of new businesses. This funding typically comes from private investors who specialise in providing capital to promising start-ups and emerging companies. Unlike traditional investors, venture capitalists are willing to take bigger risks in order to reap potentially greater rewards from businesses with ambitious growth plans.
How to choose the best high return investments
High yield investments are an attractive option for investors who want to maximise the profitability of their investment portfolio. In general, you can achieve a high percentage return on investment through two main strategies: investing in high-risk assets or investing in a conservative manner over a long time period.
Regardless of the strategy used, there is no guaranteed way to ensure high investment returns. Past performance is not a reliable indicator of future performance and getting caught up in chasing after unrealistic gains can be a costly mistake. Ultimately, high rate of return investments depend on a combination of factors, including market conditions and the individual preferences of investors.
When considering the best way to invest money with high returns, it is important to research your options carefully and understand the risks involved and potential rewards before making any investment decisions.
ASCF’s approach to high yield investments
The ASCF High Yield Fund offers investors a targeted distribution rate of 6.10% to 7.75%* per annum depending on the investment term. This fund is able to provide higher targeted returns because the pool includes a prudent selection of second mortgage loans. Borrowers are charged a higher interest rate for such loans which means investors may receive a higher rate of return compared to our first mortgage only funds.
Borrowers turn to us when they require urgent and/or short-term funding and their bank is unable to act quickly enough. As such, the interest rates we charge are higher than traditional bank finance. ASCF High Yield Fund provides short-term first and second mortgage loans to a maximum Loan to Valuation Ratio of 80% for a maximum term of 12 months. Our lending rates for borrowers start from around 8.95% per annum on a first mortgage and around 12.95% per annum on a second mortgage.
Second mortgage loans are subordinated to the primary loan on a property. If a borrower defaults and the property is sold in order to repay the debt, the proceeds from the sale will first go towards repaying the first mortgage loan before any funds are used to pay off the second mortgage loan. For mortgage fund investors, this means that there is greater risk involved with investing in second mortgage loans. However, there is also the potential for higher returns.
To apply for the ASCF High Yield Fund, first read and review the Product Disclosure Statement (PDS) and Target Market Determinations (TMD) to decide if it is right for your personal situation and financial goals. From there, you can invest in this mortgage fund by completing our application form with supporting documents. If you need help with your application, please let us know and we can assist you.
