Investing is a very attractive idea for many people because instead of working for your money, you can actually have your money work for you. The problem is that investments don’t typically give you a great return, and the better odds you want of making more money means you have to choose more risky investments. “Safe” investments like savings accounts pay very little, and you would have to have a fortune to make any meaningful amount of money by sticking it in a typical savings account. Still, some people are happy to make a little extra money and be able to feel confident that they were not going to lose their money. Risky investments sometimes pay off handsomely, but you’re just as likely to lose all the money you invest when you start playing with high-risk investments that might be viewed by some as gambling rather than investing. Everyone’s tolerance for risk is different, and there are many ways to invest. This list might be a good way to get started thinking about how you would choose to invest your money.
1 STOCK MARKET
When you hear the word “investing,” it’s quite likely that the stock market is something that comes to mind right away. It’s one of the most popular investments available, and anyone can get in the game. How you invest in the stock market will determine your risk level. If you decide to invest in individual stocks, you are betting that a particular company is going to do well in the future. How frequently you buy and sell stock can also affect your risk level. Investing for the long term is usually considered less risky, while “day trading” is probably a higher risk approach which will also require a bigger investment of your time. Some people make a full-time career our of trading stocks, but it’s a very serious commitment and it is definitely not for the faint of heart.
Bonds are a long-term investments that are essentially a contract between yourself and government. It could be a local government such as a city or town, a state government or even government at the national level. The money you invest is money that the government is borrowing from you in return for a payment you will receive on a certain date when the bond “matures.” Bonds will usually have an interest rate attached to them so you will know what to expect when you are able to cash in your bonds. Bonds will tie your money up until the contract allows you to cash it in, which can be several years in the future. Governments will sometimes issue bonds to raise money for public projects like building roads.
Perhaps you’ve seen that word bandied about here and there and wondered what it was all about. Maybe you encountered the word through spam e-mail messages or late-night infomercials that are designed to convince you to buy some “system” or training course that will teach you how to make millions in the Forex market. As you might suspect, very few people get rich investing in the Forex market or any other investment method for that matter. Forex stands for Foreign Exchange and involves buying the currency of foreign countries. For example, if you are in the United States and you expect the value of the Euro to rise in comparison to the dollar, you can buy some Euros. You win if the Euro rises in value compared to the dollar and you make money when you sell the Euros. Forex trading is usually done for the short term and can be a risky investment.
4 PRECIOUS METALS
This is an investment that tends to become very popular in times of economic uncertainty and that’s why precious metals like gold and silver have been getting a lot of attention in recent years. As governments make up the rules as they go along, and continue to print money that really isn’t backed by anything of value, many people feel that investing in something “real” like gold is a safe. The price of precious metals fluctuates based on many things and it can be risky, but it is usually a long-term strategy. It’s extremely unlikely that we’ll ever see a time when precious metals are worthless. Gold, silver and other precious metals have been used as currency for thousands of years and they are quite likely to be considered valuable far into the future.
5 SAVINGS ACCOUNT
This investment is probably most familiar to the greatest number of people. In many cases, this is the first investment many people ever make, and oftentimes it is done very early in life. Money that is given to a child as a gift from a relative is often placed in a savings account and it is often the destination for the money someone earns from their first job. Savings accounts make for an extremely safe investment, but the downside is that they pay based on an interest rate that is extremely low. Savings accounts are a great place to keep your money if you are simply concerned with savings what you make and are not looking to see a good return on your money.
6 MUTUAL FUNDS
Mutual funds might be looked at as a safer way to invest in the stock market. There are mutual funds that invest in many different things but those that invest in the stock market at the most popular. Mutual funds pool the money that’s invested by a large number of people and invest it in many different stocks. That strategy reduces the risk for every investor, since it is far less likely that 100 companies will all fail or do poorly in the future. When you invest in a single company, the outcome depends entirely on how that one company performs. Mutual funds reduce that risk by spreading it out across a number of companies. As always, with less risk you also have to expect rewards that aren’t as great. Mutual funds are a good way for the novice investor to test the waters and gain some experience with the stock market.