Understanding investment is the first step to investment. Investment options can go beyond stock so it is important to know how, when, what, and why to invest?
Investment is the best way to grow your money if done responsibly. Most of the investments are open to everyone regardless of income, age, and occupation. Anyone who has just started out their career with no savings or anyone who has reached the point of retirement with considerable wealth should not avoid investing; rather choose the best investment plan according to the situation and circumstance.
The main platform to earn a little return, with less risk is by starting a savings account. But in case you are looking to invest your small funds to be used in any emergency or like short-term savings, you can start looking for the various investment pockets available in the market. This broadly means to start purchasing assets like stocks, bonds, mutual funds, or exchange-traded funds (ETFs).
The next important question on your mind may be, when do I need to start investing?
In general, the longer you keep your money invested, the more time your investment would grow. There are times when the markets function extremely well, as such, in a particular year the compound return would be high. This would be the time you can invest your money in the market, and in case you are not in an emergency and would want to keep that amount invested, let it still stay in the market until the next hike. That is how you can play a well-earned interest game and increase your returns.
Here are a few best investments listed out, some with high risk and some with low risk. It’s important to keep in mind that low risk typically also means low returns.
1. High-yield savings accounts
Investment in a high-yield savings account will provide higher rates of return compared to any traditional bank or normal checking account. This savings account is best for short term savings or the cash that you access rarely like an emergency fund or vacation fund.
2. Certificates of deposit (CDs)
Federally insured savings account offering a fixed rate of interest for a defined time period is basically called a certificate of deposit. It offers the amount invested with interest at a fixed date in the future.
3. Money market funds
Investing in money market funds helps in buying the collection of high-quality, short-term government, bank, or corporate debt. Though it is an investment platform, the return rates are not very fair.
4. Government bonds
A loan is provided from you to any government entity like the federal or municipal government. Due to their steady nature, these bonds are known as fixed-income bonds.
5. Corporate bonds
Similar to government bonds, the only difference is that you are investing in a company rather than the government. They are comparatively riskier.
6. Mutual funds
The gathering of funds from investors to buy stocks, bonds, or other assets is widely known as Mutual Funds. It is the best inexpensive way offered to investors for various investments like spreading their money across many investments to protect against any investment-related losses.
7. Index funds
Index funds are typically similar to mutual funds that hold in a particular market index. These funds are more suitable for young investors having a long-term plan and those who can afford higher-returning stock funds than other more conservative investments, like any bonds.
8. Exchange-traded funds (ETFs)
Same as mutual funds and index funds, ETFs are considered good if you invest in them for a long time span. ETFs are basically for investors who find mutual funds to be higher or don’t have enough to invest in them because ETFs’ share prices are usually lower than the mutual funds minimum.
9. Dividend stocks
For fixed-income of bonds and the growth of individual stocks and stock funds, Dividend stock can be helpful. Though the dividend stock prices may not rise as the company would, still attracts investors because of its stability and the dividends that it provides.
10. Individual stocks
It is a comparatively risky investment where investors with a well-diversified portfolio put in a share of ownership in a company. These stocks are the potential of providing a high rate of return as per the risk bore.
11. Alternative investments and cryptocurrencies
There are other alternative asset classes that can be considered in case an investor doesn’t want to invest in the stock, bond, or cash equivalent instruments. These alternatives are cryptocurrencies like Bitcoin and Ethereum, gold and silver, private equity, hedge funds, and even coins, stamps, alcohol, and art.
12. Real estate
The traditional investment pattern of real estate is buying any property and later on selling it for a profit or owing property and regularly collecting the rent in a form of fixed income. This kind of investment can only be done by any investor who already owes a healthy investment portfolio and is ready to bear the higher risk of chasing high returns.
13. Municipal Bond funds
Municipal bond funds are the type of investment where you put in your money in a number of different municipal bonds, or munis, issued by state and local governments. The returns earned from municipal bond funds are free of federal income taxes, also may be exempt from state and local taxes too. Municipal Bonds are best for beginners as they offer diversified exposure and also for investors looking for cash flow.
WILL THESE INVESTMENTS MAKE YOU RICH?
There are various ways to become rich but… wait and think!
Not only in the young era, but every age is also quite thoughtful about making use of the finance they owe. The attitude towards holding and spending money is a great matter of concern these days.
The youth aren’t doing any sort of effective task to get themselves rich i.e. to invest their money.
According to the latest survey, only 37% of young Americans of ages 35 and under reported that they owned stocks between 2017-18 as compared to 61% of people of age above 35 who did own stocks.
So investing your hard-earned money is the basic and easy way to get rich and financially strong.
For instance, if you can manage to invest $10 per week for five years, assuming an average return of 8%, you’d have about a thousand dollars by then, all by just investing $10.
So, investing smartly, responsibly and in the most effective way to elasticize your wealth over a lifetime is the first step to take. If the right strategy is applied, anyone can become a stock market millionaire or even acquire more than that. Most importantly, you don’t need to be rich to get started, but investing is the very first step.