If you're afraid to lose a significant share of your investment do not read on. If you're tempted by the potential of speculative investment and have the money to back it up by all means, read on. In order to achieve highly abnormal returns we need to take highly abnormal risks.
Please note speculative investing is very similar to gambling (if not the same). A speculator does just that: Speculates. This article should be read carefully and by no means be used a guide for investing soundly. If you are going for speculative investment following some of the following rules might help you along your dangerous journey.
Invest in trendy sectors
Commodities of Ecology have proved very profitable these last few years. Try and locate the more trendy sectors earlier on and invest in leading companies in those sectors. It is difficult to locate these sectors but by keeping up to date and with a little luck you might just invest wisely.
Buy OTM options
While more often then not buying out of money options will result in losses it might also land extremely high returns. Buying out of money options on the eve of a company's reports or conference call just might generate that return on investment.
Invest in hedge funds
These funds often utilize extraordinary investment strategies (usually accompanied by high risk levels) in order to generate high return on investment. While many have succeeded many more have failed. These funds suffer from poor regulation and as such one should take extra caution investing in them.
Sell short and leverage your portfolio
Another way to generate high returns is to sell stocks short and use the proceeds to finance the purchase of other stocks. As any other leveraged business the risk is greatly enhanced but so is the potential gain.
Buy stocks which have fallen sharply
While this advice is often handed the other way round buying a stock which has recently fallen sharply might generate high returns as it just might rebound back up. Sharp drops in stock prices are more often then not justified but occasionally a stock's price would fall for no reason at all other then panic.
The investment techniques detailed above are a handful but are sure to make high returns for the brave should they speculate correctly (otherwise, expect to lose most if not all of your investment). Another word of caution in conclusion: I believe everyone should invest according to their financial profile. Should you happen to be risk loving and rich by all means, speculate away.