With so many investment options out there how does one figure out what to invest in? Out of all the options available stocks, bonds, and a savings account are the most popular. Other investment types include buying gold and silver, mutual funds, and exchange traded fund.
Of all the investment options out there creating a savings account is the easiest to understand and start. All you have to do is go to your local bank and open a savings account. Most banks will require a minimum to open the account, and once it is open you most carry a minimum balance. Using a savings account as an investment vehicle a relatively safe bet, but also has its downside. With a savings account your rate of return is sure to be low, and at times may not keep up with inflation.
Investing in stocks is by far the most popular investment type and has many advantages and some disadvantages. When you invest in stocks you are not just buying a piece of paper or in this day and age a digital slip. What you are getting is a small piece of the company you choose to invest in. what comes with this a share in the profits and losses the company earns. Well-picked stocks have the potential to give you a large return on the money you invested. On the opposite side of the coin you could also lose your money if something drastic happened to the company. If you decide to choose stocks as an investment be prepared to do a lot of homework.
When you invest in bonds basically you are lending money to the government or a company in exchange for a buy back price later on, and a set interest rate payable to you for the life of the bond. Bonds also have a rating system to let investors know how safe the investment is. The rating is based on the credit quality of that particular bond. Bonds can be a great way to grow your money as long as you do your homework.
Investing in a mutual fund is similar to stocks. With a mutual fund you are investing into a group of stocks that is actively managed by a fund manager. Using a mutual fund eliminates a lot of the legwork of regular stock investing, and you will be diversified so a complete loss of capital is not likely. One pitfall with mutual funds is the fact that fund managers will take a fee even if the fund lost money.
An exchange-traded fund is structured like a mutual fund, but normally mirrors an index fund, and until recently there was no active management of the fund. The big advantage of an exchange-traded fund is that they can be bought and sold just like a stock.
Buying gold and silver is another investment type. When purchasing gold and silver you are aiming to preserve your capital more than anything else. Buying gold and silver can help to preserve your capital, but have downfalls as well. The price to purchase gold and silver can be high, and then finding a place to properly store it can also present a problem.
No one can tell you what to invest in or what is best for you. You need to evaluate your goals and figure out exactly what you want from your money. Once you know your end goal then you can figure out what type of investment you would like to make. Things to consider when picking an investment vehicle are how much risk you are willing to take and the potential growth of your money. No matter what type of investment you pick be sure to educate yourself, and have a plan, don’t lose money just because you didn’t want to learn.