A Matter of Parameters
Today, investing your money is one of the few available ways of preventing your wealth from diminishing due to inflation and low interest rates – and it's the only one that may actually grow your wealth efficiently in the long term or short term.
The only question you should ask yourself is: How do you want to invest? Do you prefer maximizing your returns even if this means incurring additional risk? Or do you prefer a slow-and-steady, low-risk trickle of money into your savings account?
Investors looking for opportunities often use risk-return as an indicator for investment opportunities that combine the greatest possible returns with the lowest possible risk.
If you're investing long-term, you might be fine with having an additional income stream that offers low returns but is very dependable. Retirees in particular often go this route with their individual retirement accounts, as they're meant to replace their regular income.
If you're looking to actively grow your wealth in the short term, high returns are what you're after. And you should expect that you’ll be taking risks to reach this goal. As the old saying goes: Nothing ventured, nothing gained.
Remember: Mixing various investments with different return potentials and risk levels in your portfolio helps to diversify, limiting the overall risk you're exposed to.
To be more explicit: It's fine to earn a few thousand dollars in dividends from safe investments in real estate or government bonds every couple of months. But if you want to grow your wealth, you'll need to make investments that will net you more, while also keeping in mind that there is a risk of losing some of your money in the worst case. A good investment portfolio combines both long-term and short-term investments – for additional diversification, limiting the overall risk you're exposed to.
What Type of Investment Has the Highest Returns?
There are several investment options available for private investors, with a variety of risk-return spreads and time horizons.
Old-Fashioned Savings Accounts
It used to be that savings accounts were the go-to solution for anyone from low-income workers to the middle class. Even high-income individuals used to keep at least some of their money in savings accounts as a fall-back in case any of their investments ever fell through.
However, the role of savings accounts has shifted in time. Today, few banks offer interest rates on savings accounts that are high enough to counteract rising inflation rates. Under most circumstances, savings accounts aren't even able to keep your money from losing value, much less increase your overall wealth. Even so-called high-yield savings accounts may not be able to grow your wealth beyond the level you need just to counteract inflation.
In short: If you're looking for great returns, savings accounts are perhaps the worst place to put your money.
Real estate is one of the most common investment vehicles for private investors. These investments allow you to buy, refurbish and then sell your real estate at a profit or rent it out. These approaches have their advantages, but investors sometimes underestimate the time and money required to keep real estate investments afloat.
If you're getting into rental real estate, you need to consider the money you'll have to put into maintenance and upkeep. You're also reliant on having dependable tenants who pay their rent on time and in full. And on top of that, only prime real estate has a chance of generating massive returns. All in all, real estate is more of an option for investors aiming for a regular income instead of maximum returns.
Bonds and the Stock Market
Most individuals invest their money into the public stock market, in government or corporate bonds. These investment vehicles are generally understood to offer an excellent risk-return factor since publicly traded stock is registered with the SEC, and government bonds in particular (t-bonds, t-bills, t-notes, etc.) are as safe as they can be since they’re backed by the U.S. government.
Bonds and stocks are also a good example of why it's almost impossible to find investment opportunities that combine maximum returns with the lowest possible risk. T-bonds and t-notes are very safe, but the potential returns aren't that large, and they depend on favorable interest rates. In comparison, private company shares or corporate bonds offer better rewards at an increased risk. However, the potential returns still aren't large enough to allow smart investors to build a fortune – unless they have the time and money to entirely focus on stock trading.
High-Dividend Company Shares
Dividend-paying stocks are a great way to generate relatively regular income streams, but with publicly traded companies, the returns won't be as great as they could be. If you're investing in a publicly traded company, you'll also need to decide whether to buy common stock or preferred stock. The latter is more limited, but the former may leave you with no payout if the company's dividends aren't sufficient enough to pay every investor.
Mutual Funds and Exchange-Traded Funds (ETFs)
Putting your money into funds is a way of investing in the same opportunities you could invest in yourself – but in a much more convenient and efficient manner. Instead of buying stocks and bonds yourself, which requires you to spend much of your time researching and keeping your eyes on the market, you can just let the fund do all the work for you.
Mutual funds and ETFs are a great way to invest, but they have one tremendous downside: They're limited to investing in publicly traded, SEC-registered assets. This means that many of the much more lucrative privately traded assets simply aren't available to these funds, limiting the potential returns that they could generate.
Private equity firms are specialized in buying shares in privately traded companies, increasing the value of these companies by changing organizational aspects and then selling their shares again many years later. This means that private equity isn't the best way to get rich quickly, but it can deliver significant returns over the course of many years or decades.
Private equity is usually considered to expose you to a lower risk than other alternative investment vehicles such as hedge funds, but the time horizon of private equity investments is significantly longer, and your investment will be highly illiquid for most of that time.
Hedge funds and quantitative hedge funds are the ideal investment vehicle for investors aiming for great returns at an increased but still manageable risk. That's because they're mostly not regulated by the SEC and can invest in non-registered securities and other privately held assets. Hedge funds are free to invest in almost any publicly or privately available asset.
In addition, hedge funds can use hedging techniques and diversification to limit their risk. However, they are free to choose how many of these techniques they employ and what amount of risk-return ratio they're willing to work with. This means that no two hedge funds are alike and how much risk they take is up to the individual hedge fund manager – but hedge funds are technically able to provide you with the most significant returns of any investment vehicle thanks to the near-total freedom of investment they offer.
Why Quants Are Better Than Traditional Hedge Funds
As you can see from this overview, hedge funds have the greatest potential in terms of the returns they are able to generate. But they're also somewhat risky, as hedge fund managers are enticed to invest aggressively, based on the available data and their own experience and intuition.
This is where quantitative hedge funds can create an even more advantageous risk-return spread. Quants use computer modeling and sophisticated algorithms to make investment decisions, which means their decisions are based solely on data and computer simulations rather than the intuition of the hedge fund manager. Quants have frequently proven that this approach allows them to beat the market and outperform other hedge funds while effectively limiting the risk to investors. Quants have historically performed exceptionally well, especially in high-volatility markets, where traditional hedge funds would become ever riskier in contrast.
Ultimately, the numbers can speak for themselves, as CARL's selection of high-performance quants can offer you 15%+ targeted returns. Hedge funds are the best way to quickly generate significant returns at a manageable risk, and quants improve every aspect of hedge fund investing by using 21st-century technology in the decision-making process.
Start Investing With CARL for Maximum Returns
If you're looking to make the most out of your money, a CARL account is the easiest way to access the power of quants. With only a $20,000 minimum investment and 15%+ targeted returns, CARL's quants are an excellent investment for private investors. Combining a manageable risk level with returns that will allow you to not just prevent your money from losing value, but it will increase your wealth as well.