There are many ways you can invest your money. In deciding which one is more suited for you, you need to be clear on what your financial goals are. How long do you intend to invest? How much risk are you willing to take? These questions should be thoroughly considered before making a decision.
Different types of investments are now more accessible and are also less rigid than before. Here's a list of the common investments and its more characteristics:
Bonds. These are securities founded on debt and generally have fixed income. When you purchase a bond, you are actually lending out your money for an agreed-upon interest and eventual payout of the amount you lent out. This is a good investment choice if you have a definite time frame or if you do not want to take too much risk.
Stocks. Purchasing stocks make you a part owner of the business that owns the shares. This entitles you to receive proportionate share in profits referred to as dividend. Stocks are generally more volatile than bonds due to price fluctuation, but it may also give you higher returns when the price appreciates.
Mutual Fund. When you buy a mutual fund, you are pooling your money with other investors to pay a professional manager to select specific investments for you. A mutual fund is a combination of many investment vehicles. It hinges on the theory that a professional is in a better position to make investment decisions than you. Once you find a competent investment manager you can trust, this type of investment can be really rewarding.
Forex. This type of investment takes advantage of movement between two or more currencies. A typical transaction includes a purchase of certain quantity of one currency by paying a quantity of another currency. Most people engaged in this activity devote their time on speculating the currency movement. This is highly volatile and potentially risky for novice investors.
Precious Metals. Some investors like to buy rare or high valued metals expecting the prices to appreciate in the future. The most common kind include gold, silver, and platinum.
I have covered the basics but there are other types of investments like derivative, futures, options and rights. These are more sophisticated in nature and take more time to fully understand. Knowing the right kind of investment will be crucial to help you build your investment portfolio. You should also determine how much time you can actually devote in learning these investments as this will help you make wise decisions specially when faced under financial stress.
Next time we will discuss how to start investing and where we can access it. Have a wonderful weekend!