Life is an endless series of choices: one of the hardest is deciding where and how to invest your money. You need a basic understanding of how the most popular investment vehicles work and what they represent to make the best investment choices.
From share trading to investing in real estate, read on to find out how you can make the right investment choice, and which will help you grow your wealth. Each will have its own strengths and weaknesses, however, there is more to just growth to consider.
Along with growth, you must also understand risk, safety, liquidity, tax treatment, and age or contribution limitations. All of these go into making an investment what it is and also affects how you should approach that investment. The following are a few key terms that can help increase your knowledge of the investment process and allow you to make more informed decisions:
A debt instrument, a bond is a loan that you are giving to the government, a company or municipality in exchange for a pre-set interest rate. In return for your loan, they will pay it out over a period of time until the bond matures. The main advantage of bonds is that they are very safe, one of the most risk-averse investments you can make.
Buying bonds from the government makes your investment is less risky, but returns will be consequentially lower. But when you buy a bond from well-established companies, which are referred to as investment grade bonds, they will offer greater returns than government bonds, but the risk will increase.
Generally, because bonds are tied to an interest rate, they are less risky and have lower returns.
Property is a favorable investment choice to many. It is considered more of a long-term investment as it may take time for the property to increase in value. To choose the right investment property, it’s a good idea to look at areas that have recently increased in value. In general, housing close to major capital cities is a safe investment. If you choose to invest in property such as Juniper Hill condo or Parc Esta condo, you will reap great rewards.
Rather than waiting for prices to boom in a particular area, you may decide to purchase a property that’s run down, renovate and resell it. Studying market trends and getting expert advice is recommended before making any purchase.
Get yourself familiar with the property market by reading real estate magazines, subscribing to real estate websites and keeping yourself up to date with market prices.
Stocks are, in essence, ownership in a company. Purchasing stocks gives you partial ownership of a publicly traded company, in proportion to how much of the company you’ve paid for. Even though you won’t be doing the actual day-to-day running of the company, a dividend-paying stock will give you a share of the profits.
It can be risky, but if you know how to invest correctly, you can find the mutual fund or the right stock for a profitable investment. You profit is if the stock increases in value and you sell it. If you are new to trading on the stock market, it’s a good idea to seek some professional advice when it comes to trading stocks.
This is not an exhaustive list. There are so many different investment options and many people will try to persuade you one way or the other as to what they think is the best investment option for you. You should always consider the investment objectives, and charges and expenses of ETFs [Exchange-traded fund] or mutual funds carefully before investing.
Remember, all investments are subject to risk, so it is recommended that you consult an independent financial or legal advisor for specific advice about your situation. Try to learn the common types of investments and the language that defines them: it will make you a smarter investor.