So you got money, and you want to invest it. You’re a little overwhelmed on figuring out how to do it, though. The Information Age has no shortage of opinion on where to invest your money.
Let’s simplify it and get a solid grasp of investing.
First things first, you need to have a goal for your investments and know where the best place to invest for your goals would be. When you invest money, you are either buying a portion of a company or commodity with the belief that it will grow over time.
It’s important to understand that investing is not a get-rich-quick scheme. You won’t see money overnight. Investing is a way to grow money that you already have. So yes, you do need some amount of money to begin with – but not a lot. Thanks for compounding interest, even small sums of money can make huge leaps overtime and grow (if you choose the right investments).
So, if you’re wondering where to invest your money – these are good options to consider.
The stock market
This is the most common place to invest money. When you buy a stock, you own a small portion of the company you bought into. When the company is doing well and profits, they may pay you a portion of those profits in dividends based on how many shares of stock you own.
Hopefully, the value of the company grows over time – so that way the price of the shares you own grow as well, making it profitable to sell them at a later date.
Investment Bonds
When you purchase a bond, you are essentially loaning money to either a company or the government (for US investors, this is typically the US government, though you can buy foreign bonds as well).
The government or company selling you the bond will pay you interest on the loan over the duration of the bonds lifecycle.
While bonds are considered less of a risk than stocks, the return is much lower.
Mutual Funds
Rather than buying a single stock, mutual funds enable you to buy a basket of stocks in one purchase. The stocks in a mutual fund are typically chosen and managed by a mutual fund manager.
However, the mutual fund managers charge a percentage based fee with you invest in their mutual fund. Most mutual fund investors don’t beat the stock market.
Savings account
If you’re looking for the least risky way to invest – bingo. Keep in mind, it might be the worst way, too. Letting your savings collect interest is low risk, but extremely low reward.
Savings accounts are god for putting a lump sum of cash into a safe space so you can purchase other investments or use in emergencies. When you invest in your savings account – you’re investing in your future.
Physical commodities
Things like gold and silver are considered investments because they can be sold in hard economic times for profit.
While these are the basics, if you’re looking to getting into investing – do your research and give yourself the best possible chance at succeeding by learning strategies to ensure you’re putting your money to good use.