Fortune favors the bold. At least, that’s the thinking behind investing in high-risk stocks.
Aggressive investors chase after these companies in the hopes of reaping the rewards when the stock price soars. If you’re looking to give your investment portfolio a shot in the arm, this post can guide you through what you need to know about high-risk/reward stocks, as well as some of the best companies to invest in right now.
Should You Invest in High-Risk Stocks?
As an investor, you may have reservations about sinking your money into high-risk stocks. After all, aren’t these companies, well, risky? Sure. But that’s also what makes them a good investment.
A stock is risky if it’s vulnerable to market fluctuations or a lack of performance. But the company could also perform favorably, seeing its stock price climb. That’s why a high-risk stock is equally a high-reward stock, which is why investors are willing to gamble on investing in these companies.
How to Invest in High-Risk, High-Reward Stocks
Choosing to invest in high-risk, high-reward stocks is a big decision. Here are some basic tips for managing the risks these companies pose while holding out for the possibility of great rewards.
- Set a budget, and never invest more than you can afford to lose
- Maintain a balanced, diversified portfolio to absorb risk
- Research each company carefully (see below)
- Monitor your investments and make adjustments as needed
It’s also important to keep in mind that younger investors can typically handle more risk than older investors.
That’s because if their investments don’t perform as expected, they literally have a lifetime to make adjustments to their portfolios and recover from the loss. But anyone can absorb some risk as long as they maintain a balanced portfolio.
The Best High-Risk Stocks to Buy Now
What are the best high-risk, high-reward stocks of 2023? The following list provides tips on some good high-risk stocks that might make valuable additions to your investment portfolio.
SNDL, Inc. (SNDL)
You may be more familiar with SNDL, Inc. as Sundial Growers, a leading grower and distributor of recreational cannabis in Canada.
While the company has historically focused on cultivation, they also operate a network of retail stores. Most recently, they’ve acquired one of North America’s largest private-sector alcohol retailers, which has given SNDL’s retail division a significant boost.
Cannabis stocks have been notoriously risky, mainly because the recreational marijuana market is relatively new. That means many key players are small startups, with no clear indicator of who will emerge as the true retail giant.
Additionally, since marijuana legalization has been on a state-by-state basis here in the U.S., the market has been fragmented.
That said, Canada doesn’t have this level of fragmentation, which may lead to a more even period of growth. And since SNDL is supported by its production and investment divisions, the company may offer more stability than other cannabis companies.
Investors might take advantage of the company now that they have a wider retail network, making SNDL a high-risk, high-reward option for your portfolio.
Himax Technologies (HIMX)
Himax is a Taiwanese producer of fabless semiconductors. The geopolitical instability between Taiwan and China makes this a riskier investment, and its fluctuating stock price has directly reflected these tensions.
Even so, HIMX may prove to be one of the best high-risk stocks to buy in 2023. The company has maintained a strong balance sheet, and the recent concerns over the global supply of semiconductors may give the company an edge in the manufacturing and technology sectors.
Tesla, Inc. (TSLA)
With so much emphasis on sustainability in the automotive industry, you wouldn’t expect to find an electric vehicle (EV) producer on a list of risky stocks to buy now.
However, world-renowned EV manufacturer Tesla saw its stock plummet by 65% in 2022 alone. Critics blame global competition, as well as some bad PR resulting from founder Elon Musk having his attention diverted by projects like the acquisition of Twitter.
Recently, though, new factories have opened in both Germany and Texas, creating jobs and helping Tesla roll out the new electric semitruck, with plans for new consumer vehicles coming to market by mid-2023.
Given that the company remains a virtual synonym for electric cars, it’s likely that investors will find this stock undervalued, creating a chance to grab some shares at a historic price.
Bionano Genomics, Inc. (BNGO)
If it took you a minute to sound out the company’s name, it might be because Bionano Genomics offers some of the most advanced life science technology on the market today. Their platform allows researchers to analyze long segments of DNA and other “macromolecules” that are essential to life.
Life science companies aren’t always strong investments, often through no fault of the companies themselves. The path to regulatory approval isn’t always linear, which can create delays and other snags that can slow a company’s development.
Fortunately, Bionano has recently developed a commercial method for isolating high-molecular-weight DNA and extraction tools that are compatible with human blood samples. These developments may spell strong returns for the company, which is good news for investors.
Riskified is an Israeli tech company committed to protecting against fraud, chargebacks, and cybercrime.
Historically, the company’s performance has been middling at best, due in part to current market saturation. But the company’s balance sheet offsets this risk, making Riskified a stable company to invest in. Still, investors should monitor the market carefully to see which direction the price eventually swings.
Sorrento Therapeutics (SRNE)
Sorrento Therapeutics is a biopharmaceutical company committed to researching treatments for cancer, metabolic conditions, and certain infectious diseases.
Sorrento may just be one of the best high-risk stocks right now. The company’s historic volatility may be attributed to the sheer breadth of its treatment products. But recently, they’ve become more focused.
More specifically, the company has recently completed the development of the drug abivertinib, which belongs to a class of pharmaceuticals known as “tyrosine kinase inhibitors.”
Sorrento is also in late-stage development of the treatment of advanced non-small cell lung cancer and certain forms of prostate cancer. Should this development lead to a final product, it could be a breakthrough for the company — and its investors.
Many consumers may recognize Vizio as the producer of flat-screen television sets. Shifts in consumer pricing have led to some disappointing sales for the electronics brand, which is what contributes to Vizio’s current risk profile.
What gives Vizio the possibility of reward? It may be that the company’s underperformance is driven by broader economic pressures and consumer behavior.
If the economy improves, America’s spending habits may normalize, especially around the holiday season. This could potentially make Vizio one of the best high-risk, high-return stocks in the electronics sector.
Intuit, Inc. (INTU)
You might be familiar with Intuit for its tax preparation and personal finance software applications, including QuickBooks and TurboTax. But many business entities have shifted away from desktop-based accounting tools in favor of cloud-based solutions that offer more features and automation options.
Intuit is up for the challenge. The company’s growing product portfolio and integrative features are keeping pace with the world of finance and business, making them a potentially lucrative investment.
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