When someone mentions ‘investing’, our mind often wanders to one of two things – those busy stock exchange offices or real estate purchasing. You imagined one of the two, right?
Unlike the common impression, investing is not only for wealthy people and those who have a spare budget. With the right methods and strategies, investing can be a great way to grow money without leaving a financial gap in your everyday life.
Most investment types today are available to all regardless of income, career, or age. Naturally, depending on status, budget, as well as your preference, some options are much better than others. A person who’s just starting a new career without any savings (and maybe even some debt), will have different plans for investments compared to someone who’s worked their entire life and is close to retirement. What to invest in now will also depend on the investment cycle.
But, how can you choose which type of investing to pursue?
Weighing Your Options for Investing
According to a CNBC survey, 70% of Americans regret not handling their money differently in 2019, saying that they regret not having invested more.
So, not only should you decide where and what to invest in, but you should also decide how much to invest and when.
To make the best investing decisions, you need to understand and weigh all your options first. This is the perfect place to do it. Below you’ll find the 9 best investment options available to people today.
Cryptocurrency investments are trending more than ever. What started as a hobby for risk-takers and wealthy people soon turned into the best investment in history. Just think about Bitcoin. Its first increase was in 2011 when the price jumped from a single dollar to $32 in just a few months, which was a gain of 3,200% for those who invested first. In 2020, Bitcoin started at $7,200 and grew to an unbelievable $29,089 by 31 December.
Now that there are plenty of other digital currencies, and also because of the decrease of BTC during the pandemic, investors started considering other options in addition or instead of this currency. One of the biggest competitors of this currency, Ethereum, is certainly something to consider if you’re interested in this type of investment. Cryptocurrency books will help you learn more about the science, maths and financial wizardry behind this asset class.
How to invest in crypto
WealthSimple, an amazing financial tool for investors has created a very useful Ethereum guide that should help you learn more about this coin, as well as provide you with tips for investing in it. Cryptocurrency investments are similar to the Forex market, and you can find many sites and platforms to buy, sell, or exchange your coins with others.
This option is perfect for those who want something different from traditional savings and investments, and are prepared to take some risks.
Gold is a commodity that never grows old in the world of investment. This practice goes way back and, at one moment, it is good. In another, it is a bad idea. The price of gold is affected by many things such as environmental changes and political actions.
This means that such an investment does not come with protections against price drops, but you might also get high fluctuations upward, to your benefit.
Gold is perhaps the asset class with the most different option of how to invest. You could choose to buy gold bullion coins, a physical gold ETF or even invest in the shares of a gold mining company.
Gold is best for the ones who aren’t in a rush to collect their gains. This is somewhat of betting, but gold never vanishes or goes out of style so, when the price goes up, if you still have it, you can get a high return for your money.
CD in the world of investment is short for certificate deposit. This is a bank product that you can purchase from banks. When you do that, you agree to loan the bank in question some money for a selected amount of time, as well as pre-agreed interest.
Basically, it’s like a loan, but instead of you taking it from them, they are taking it from you. This makes for a very low-risk investment, but as such, it usually comes with low rewards. Most of the banks that offer this will grant you a return that doesn’t even go to 2% per year.
CDs are best for people who want to play it safe. In any way, you are getting back the money you deposited, usually with a small gain. If you are on a limited budget and want to save some cash on the side, this is a great option. It’s also great if you need the money at a fixed date such as, for example, your wedding or home down payment.
4. High-yield savings accounts
Money management, as well as online cash ISAs, have much higher rates of return compared to CDs and traditional bank savings. These are similar to savings accounts, but more of a combo with checking accounts. How does this work, you might ask?
Such accounts are offered by UK stockbrokers firms in most cases and sometimes come with checks or debit cards. The interest rates are usually similar to savings accounts.
You should opt for this type of investment if you are looking for a short-term solution. If you need your money occasionally such as, for example, an emergency fund, it’s a good idea to invest in high-yield savings.
5. Money market mutual funds
This is not the same as money market accounts i.e. bank deposit accounts. If you choose to invest in MMMF, you are purchasing short-term, high-quality bank, government, or corporate debt.
These funds can be bought from banks and mutual fund providers, as well as online discount brokerage.
Those who need money soon and wouldn’t mind higher market risk can opt for this type of investment. Experienced investors also use such funds to hold some of their portfolios in a safer option than stocks.
6. Government bonds
Government bonds are loans that you make to the government or its entity. In return, that entity pays you interest on your loan. This is a long-term investment, typically going up to 20 or 30 years.
Due to the steady payments stream, government bonds are considered to offer fixed-income security. These are virtually risk-free since they are backed by the government’s credit.
Still, because of the minimal risks, the return is minimal also. Over multiple years, this may net you around a 3% return.
If you’re an investor striving to make safer, long-term investments, this is a great thing for you. Bonds add less volatility to an investor’s portfolio, and they usually go up when the stocks go down. It’s why many experienced investors combine them with stocks.
7. Corporate bonds
This is pretty much the same as government bonds in terms of operating. However, in this case, you aren’t making a loan to the government, but to a company instead. These offer less security since they aren’t backed by the government, so they resemble stocks more than bonds. Because of it, they also offer higher returns in most cases.
If you don’t mind the risk and have a good feeling about a company, you might want to consider this. The higher the likelihood of a company going out of business, the higher the yield when you invest in corporate bonds. It is your job to figure out the return and risk balance that works for you. Check out the best bond investing books for more information.
8. Mutual funds
All those investors’ stocks and bonds, as well as other assets, go into a mutual fund pool. Such funds offer you a cheap way to diversify i.e. allow you to spread your cash across various investments, therefore minimizing the risks and losses.
This is great for long-term saving goals. Mutual funds are excellent for retirement savings, and for investors that don’t want to bother themselves with tracking the market. You don’t have to manage a portfolio of different stocks since the mutual fund takes care of it all. These are built by financial experts and investors can expect a compounded rate of return of 15% annually if they do this long-term.
Exchange-traded funds are very similar to mutual funds. They also pool money from investors to purchase various securities. The only difference lies in the way they are sold. In this case, you will buy shares of cheap equity EFTs similarly to buying stock shares i.e. these are sold on the stock market.
Because of this, investors have more control over the price and are subject to fewer fees. The reward is also dependent on the performance of the index you invested in.
Do you have a long-time investment play? Then, these are good options for you. This is also good for those who don’t have enough cash to meet the investment requirements of mutual funds.
Naturally, your options for making investments do not end here. There are retirement funds, realty investments, various stocks, and other options. Your decision is yours only, but you should think carefully before you pick any of the options. Make sure to base your decision on your timeline, budget, as well as your risk tolerance. Good luck!