Probably you've heard a thousand times how investments can be financial vehicles to help you turn your dreams into reality, but are confused about where to start from. Beyond having the money to invest, where to invest is an important consideration.
There are different investment options, each offering its unique advantages as well as risks. Hence, it will be advisable to look into some of these means of investment to decide which of them is most suitable for you. Here, we've explained some investment tools to help you make a choice.
#1. Stock Market
The stock market is one of the most popular investment choices. The stock market refers to a market that facilitates buying and selling of stocks. Stocks here represent companies that are publicly traded - they allow the public to buy their shares.
By buying the shares of a company you become entitled to the assets and profit of the company. Stocks are therefore a financial instrument that grants individual ownership to a proportion of a company's assets and earnings. However, the number of shares you buy will determine the slice of the company you own.
Investing in the stock market can be a very good source of income especially when you invest in a well-performing stock over the long term. Yet, you must have a high-risk tolerance to invest in stocks as the stock market is highly volatile.
#2. Certificates of Deposit
Certificates of deposit, or CDs, are federal-insured investments issued by a bank. CDs are time-bound savings accounts that let you invest a certain amount of money for a fixed term, 6 months, 1 year, etc, for interest. With a CD the bank pays you interest at regular intervals for your investment.
At the time of maturity (end of the fixed term) the issuing bank pays you your original investment plus the interest accrued on the investment. CDs offer more advantages than savings accounts because they pay you higher interest rates.
CDs are more suitable for investors who have a low tolerance to risk, you won't have to worry about market fluctuations, unlike the stock market. Also, if you intend to lock your money for future use like retirement, this may be apt since it's a fixed-term investment for higher interest rates.
#3. Bonds
Bonds refer to a type of financial instrument that allows the government and corporations to borrow money from the public. A company or the government issues bonds so that investors can lend them the money they need in exchange for a regular interest payment.
Bonds are time-bound, there is a set/ maturity period for the bond, after which the issuer pays back the money to the investor(s).
Here are the benefits of investing in bonds:
● A stable means of income
● Safer investment, the level of volatility is often lower than equities.
● Tax advantages: municipal bonds pay tax-free interests
● Diversification: some bonds are issued through mutual funds or ETFs offering you diversification which is a good risk hedge.
#4. Real Estate
Real Estate investment refers to an investment in properties to yield returns. Real estate is one of the best investments because they have low risks as you are not investing your money in some sort of abstract thing. In addition, with shelter as a basic need of living, you may be certain of good returns on investment.
Nowadays, you don't need to buy a house to have a real estate portfolio. There are different ways to invest in real estate. You can invest through a REIT (Real Estate Investment Trust), through online real estate investment platforms, or even through flipping.
#5. Cryptocurrencies
Over the recent years, cryptocurrencies, or simply crypto, has gained massive ground in popularity and usage. The catch about crypto is that it is a very volatile market and so, you can take advantage of the volatility if you have a good understanding of the market.
You can decide to buy and "hodl" crypto assets. That means, you buy coins, store them in your online wallet and wait for the prices to spike to resell to make profit. Due to the fast growth of crypto, it is a good option for long-term investments.
Conclusion
Hopefully, with this information about where to invest, you can now start investing to turn your dreams into reality.
Below is a nice animated video which speaks about investing in the stock market.
https://www.youtube.com/watch?v=cRGHEYqIlJk
Hope this was useful for you! Please note that the above content is not an investment advise and shall be considered only for informative purpose.
Feel free to share you comments below.
