There are numerous ways to invest money and each one implies a certain level of risk. Depending on your income appetite and investing ambitions, you may be recommended a certain type of investments. If you want to form a complex investment portfolio with the various investment tools to diversify risks – you might find our recommendations extra helpful.
We already wrote about high-yields investment and low-risk investment, so in order to get the full picture, you are advised to read the articles first.
Here is the brief guide on choosing the type of investment which matches your personal preferences and willingness to take risks. Each way has pros and cons and your investor’s task is to determine whether the pros outweigh the cons of certain types of investments you are going to choose.
You might also find useful one of these tools for managing and following your investments. Each of those apps is purposed to keep you updated and help with effective investment goals and financial performance calculations.
1. You prefer safe investments with low, yet stable profit
Low-risk or safe investments are the best choice if you want to keep your money safe, rather than to get the profit. The most common low-risk options are:
- Savings accounts
These are the bank accounts with the interest rate about 0,5% a year. The interest rate is so low that it is not enough to compensate yearly inflation rate; but on the other hand, it’s the safest way to take care of your money.
- Certificate of Deposits
Issued by the bank, a certificate of deposit makes one of the safest investment vehicles with the low interest rate and fixed date of final payment.
- Treasury Bills (T-bills)
Treasury bills are papers, issued by the government and therefore all risks are covered by the government. You get a certain interest rate in exchange for your money used by the government.
- Dividend-paying stocks
Unlike trading on a stock exchange, your revenue doesn’t depend on stock price’s fluctuation. You just get your tiny dividends without risking anything.
2. You are willing to take a risk in order to get a high reward
High-yield investments may bring you to the top of financial independence; still, you have to realize the level and the nature of risks you are about to take.
Stocks are papers issued by companies and traded on stock exchange. When stocks appreciate you earn when they prop you lose. It’s important to sell the stocks at their peak to get a maximum profit.
Options are the right to buy or sell the financial vehicle before or on the certain date, defined in the contract. It’s the same risky and the same rewarding as stocks.
- Initial Public Offerings
It’s the first stocks offering to the market from the company which wants to be traded at stock exchange.
The initial price of stocks is low, so the profit may be significant (as well as a loss).
- Mutual Funds
Your investment becomes a part of the bigger investment with a further profit sharing among all investors (can be thousands).
3. You have a small amount to invest in short-term
Having a small amount to invest does not prevent you from getting a good profit, yet risks are still proportional to your income expectations.
Trading cheap stocks is a most common option for short term investing. Besides, some banks offer speculative stock trading with leverage 1/10 or even 1/100.
- Master Limited Partnerships
You buy a participation in the certain business venture and get the profit, according to the amount you’ve invested. If the company undergoes crisis or go broke you share the loss as well.
- Trading with leverage
Speculative trading, especially foreign exchange currency trading with leverage gives you an opportunity to trade the amount bigger than the actual amount by 100 times, while the profit is entirely yours. Risks are extremely high, but the potential reward is quick.
- Mutual Funds
You participate in collective investment and share the profit or loss with other participants.
4. You consider long-term investments with reliable income and moderate risks
Long-term investing takes a thorough approach as there is no place for quick or occasional profits and unreasonable risks. Usually, long-term investors opt for moderate yields and tend to avoid risks as significant amounts of money are involved.
- Real Estate
Real estate is often considered as an alternative investment. Buying real estate in order to rent it out and get a monthly income is great investment with relatively low risk.
- Corporate Bonds
Bonds of big market players are a good investment with the moderate interest rate (fixed).
The only risks are if the company goes bust.
- Cash Value Insurance
Universal Live Insurance can be considered as a way of investing money, according to the terms of a
- Reliable stocks (Blue chips)
Stocks of big companies (like IBM, General Motors, Microsoft) are not as risky as stocks of other market players as those giants are not so easily influenced by the market moods. Blue chips are expensive stocks but reliable and considered the main investment asset in serious long-term portfolios.