Where Should You Invest In?
Now that you know why you need to invest, it's time to learn more about some investments choice. As you may have noticed, there are a lot of investments available in market, so you need to find the right ones for you. The choice is based on how much you want to earn in the future and how much the risk you can afford
Each investment vehicle has its own risk. For example investing in stock market has bigger risk than putting your money in Certificate of Deposit (CD) in bank. Stock market may experience crash, company may going into bankcruptcy and its stock tumble into its lowest price. But this kind of risky investment also offers higher return. Basic investing principle applied here: HIGH RISK HIGH RETURN.
Here I list several investment choice you can choose. Listed from lowest to highest risk (that means also from lowest return to possibility of highest return)
- Savings account: Savings accounts earn a small amount in interest. They're a little better than putting your money in a drawer or piggy bank. Most people don't consider saving account as an investment choice, but use them only as temporary money parking before the money goest to 'real' investment
- Certificate of deposit (CD): This is a specialized deposit you make at a bank. The interest rate on CDs is higher than saving account, depends on the duration of the CD. So, the CD is the best choice for beginner investor
- Bonds: Bonds come in various forms. They're known as "fixed-income" securities because the amount of income the bond generates each year is "fixed," or set, when the bond is sold. From an investor's point of view, bonds are similar to CDs, except that the government or corporations issue them, instead of banks.
- Real Estate: You can buy a house, apartment, or condo then rent or sell it again for higher price value.
- Business: You can put your money by establishing your own business. You can also put your money in other people's business directly, hoping for a profit share
- Commodities: Usually you can invest in precious metal like gold. Beware that gold price is highly fluctuative. Beside gold, there are various choice of commodities investment from oil, corn, base metal, and a whole lot more
- Foreign Exchange: Buy foreign currencies in money market, like euro, yen, poundsterling and expect their value go up and sell them again for capital gain.
- Stocks: Stocks are a way for individuals to own parts of businesses. A share of stock represents a proportional share of ownership in a company. As the value of the company changes, the value of the share may rises or falls. You can benefit from dividend (profit sharing from company revenue) or capital gain by selling stocks at higher price. You can buy and sell stocks yourself, alternatively you can buy stocks indirectly from Mutual Funds.
- Mutual funds: Mutual funds are a way for investors to invest their money to buy stocks, bonds, or anything else the fund manager decides is worthwhile. Instead of managing your money yourself, you turn over the responsibility of managing that money to a professional (fund managers). Unfortunately, the vast majority of such "professionals" tend to underperform the market indexes.
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