Monday, 31 August 2009 20:03

Q. How can i invest $30,000 in order to triple the amount in a year. What are the viable investment options? Will be very grateful for your opinion.

A. It's good to have goals. However, each goal has to be reasonable. Most investors would be happy to make 15%-20% a year. They assume reasonable risk and get a reasonable return. As far as the 300% annual gains are concerned, there are a few options in achieving that goal, but each of them assumes taking a huge risk, which it is safe to say that no person in their sober mind would do. However, i will name the best few options here, to illustrate my point and hopefully talk you out of trying to reach that goal.

- use margin and leverage your investments. If you leverage by a factor of 10, you will reach your 300% goal with only 30% return on individual stocks. However, most brokers will not grant you so high leverage. Also, with that leverage if you lose only $3,000, you will get a margin call, and will no longer be able to trade your desired amount.

- use options. If you buy cheap options, let's say worth $10, and they appreciate to $30 before expiring, you will have achieved your goal. Options involve a lot of variables, and i have always advised general investing public against using options for investment purposes. Options are used for hedging purposes, which is safe, and can cause serious failure when used for a different purpose.

- start a business or a venture with $30,000. Doing that will require a lot of effort, common sense, and brainwork, but eventually can pay off. If you start generating income, you can increase the valuation of your business three-fold, in which case, you will achieve your goal.

I hope you can reflect over this list and reevaluate your goals. If you still decide to pursue your stated goal, you can invest $10,000 into a 1-year CD as a safety cushion, and use the remaining $20,000 to start a business.

Good luck!

Moni.