Whether you have just come into a large lump sum of money or have some money set aside to begin investing, there are a variety of ways to go about investing your money. It is important to do your research prior to investing. There are some mainstream ways to invest that can work for even a novice, but you should always weigh the risks with the probable gains.
Investing in a company by purchasing shares through a stock broker is one of the most popular types of investing. Each share represents your small portion of ownership of the company. Although you can make decent money after you sell the shares when the value goes up, you can also lose a lot of money if the company does not do well and the value drops.
Investing in raw material, more commonly referred to as a commodity, means that you are investing in things like gold, iron, silver, natural gas, cotton, oil, diamonds and cattle. The way you proceed with investing in commodities depends on which type you pick and the type of investment vehicle you prefer.
Although it may not seem like an investment, paying off your debt is the most common way of investing money. Debt repayment lessens your financial risk and provides you with freedom from debt; this alone makes this investment the first to accomplish if you are in debt.
Foreign Currency Exchange, otherwise known as FOREX, is likely the most risky type of investment when speaking of beginners. You must study the patterns and predict the buying power of a variety of currencies as they relate to the currencies in other governments. This is an extremely high-risk investment that should be done with as much care as possible.
Government and corporate bonds are at a moderate risk level when investing. These are debt securities where the borrower is required to pay the interest and/or principle to the investor at a later date. This is usually low interest unless the borrower defaults, therefore the risk is moderate for investors. Investors can also benefit from this type of investment by allowing the money to increase while their children are growing up; by the time the children reach 18, the investments can quickly be cashed out for college or another expense.
When an investor pays a life insurance company to payback money to them over a period of time in small increments, this is called an annuity. Depending on the specific company, the investor can choose to receive payments until he is deceased or can set up a stop date. Since the insurance company may go bankrupt, there is moderate risk involved, although many states cover up to $100,000 in the event of a company defaulting.
Bank accounts offer extremely low returns and are better used as a form of storing cash. Some of the types of accounts at banks include personal savings accounts, business savings accounts, personal checking accounts, business checking accounts and Certificates of Deposits (CDs).
Building your own business is an extremely risky investment. Although you could become financially free and your own boss, there is the huge risk of losing everything. When starting your own business, do your research, put together a business plan and seek advice from others with experience.
Investing in real estate is another popular type of investment. Depending on your method of investing, real estate investing can become extremely lucrative if done in the proper locations and the correct way. You can purchase homes to fix them up and sell them for a higher price, or you can purchase homes to turn around and rent them to tenants for a slightly higher cost.
Precious metals, such as gold, are another way to invest your money. The value of precious metals rises when other investment values drop. Purchasing gold bullion is extremely secure, but the return is minuscule.
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- Advantages & Disadvantages of Investing in Real Estate
- Savings Bonds Vs. Municipal Bonds
- What Is a Private Sector Bond?
- How to Invest in Debt