Smart Ways to Invest

There are smart alternatives to investing in stocks.
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Although stocks may be the most popular investment, there are other ways to invest your money. All of them involve a certain level of risk; however, the smart investments are the ones not directly affected by political, social and economic conditions, and that pay off in the long run.

Precious Metals

Investing in precious metals, such as gold, is a smart way to invest your money because it is not dependent on the condition of the economy. Although the value of gold fluctuates, it retains its value even in the worst of economic times; it is considered a hedge investment, and is often purchased when the economy is expected to go south. In fact, the value of gold and other precious metals tend to rise as other types of investments lose value. In an 'up' economy, however, gold tends to do less well than other investments. So, while it is a safe, smart investment, and will hold up well in down times, it may not give a particularly good return when the economy is doing well.

Time Deposits

Time deposits that are made at banking institutions and credit unions are called certificates of deposit (CDs). This type of investment requires investors to deposit money for a specified term, and allows them to withdraw the money once this time period is over. The interest rates are somewhat better than with regular savings accounts. The benefit of a CD is that the interest rate is locked in and does not change throughout the specified term, no matter what the economy does. It is important for investors to know that although money can be withdrawn prior to the end of the term, doing so usually triggers a large penalty that can reduce the overall return.

U.S. Treasury Securities

The United States Treasury Department issues treasury bills (T-bills) as securities. They are sold in terms of up to one year, but terms can be as short as a few days. The values of these securities are determined at auctions that occur on a weekly or monthly basis. Although treasuries don't offer returns as high as other investments, this option is fully backed by the United States government. For example, you purchase a 13-week, $5,000 T-bill for $4,875; if held until the maturity date, you receive $5,000, which is $125 more than what you paid.

City and State Bonds

City and state governments issue municipal bonds that they use to raise funds, usually for specific projects. Those who buy muni bonds benefit when the bonds build up interest. Some municipal bonds are comparable to a CD, while others are longer-term investments. The interest from long-term muni bonds is deposited into the investor’s bank account annually. Although the interest on municipal bonds is typically lower than that of corporate bonds, municipal bonds have tax benefits that allow the interest to be exempt from federal income tax. Buyers who live where the bond is issued may also receive interest exemption from local and state taxes.

Real Estate

Although the value of a property can decrease -- and occasionally does due to the economy -- real estate tends to appreciate in value, and is a smart investment due to the demand. Whether you are planning a series of upgrades in your current home for a future profit, investing in a rental property, or purchasing a piece of land, someone always needs a place to live. When investing in a property, focus on adding value, saving money and ensuring that your project pays off. Some priorities to focus on include completing all repairs efficiently, remodeling instead of adding on, and upgrading with eco-friendly appliances.

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