“The best time to plant a tree was twenty years ago. The second best time is now”- Chinese Proverb.
You cannot become rich until or unless you are not invested well. Earning a salary and business profit is well and good, but it is also very important to invest or diversify your income in different sectors. Like Stock, Mutual Fund, Real Estate and Bonds. It not only provides fair long term return as well as it will help you to beat inflation and economic fluctuations.
What is Investment?
In simple terms, Investment is a process of putting your earned or gained money in an asset (whether it is Tangible or Intangible) with the objective to grow your money in a certain period of time.
Examples: Stock, Mutual Fund, Gold and Commodities, Real Estate and High Yield Savings Accounts.
1. Stock or Individual Stocks
Lot of people believe that Stock is one of the most volatile subject and many risks are included. Maybe it is not true, if you are well aware and study company’s fundamentals correctly, then Individual stock is going to be the perfect option to invest for the long term. However, its long term return always beats inflation and highest compared to other asset classes like Bonds or ETFs. Despite Long term benefits, Stocks will provide dividends either quarterly or yearly to their shareholders. When companies grow your invested amount will also grow. Do not skip investing in one of the finest investment options if you want to see compounding money in future.
2. Mutual Fund
Mutual Fund is another investment option like Stock for those who are looking for long term investments. Under stock you are investing individual company stock like Facebook, Tesla or Amazon. But under Mutual Fund investment pools managed by professionals that allow investors to buy a diverse range of portfolios of stocks. If you don’t want to take a high risk and are looking for a decent amount of return then a Mutual fund is the perfect option. Mutual funds provide diversification and professional management, which makes them who look at hands off approaches.
3. Real Estate
Real estate requires a huge amount of money to start and invest initially. Real estate is considered as the Tangible asset, and always protects investors from inflation. If you are investing a lump sum once, it could generate rental monthly income and appreciates your values over a period of time. It includes low risk compared to the stock or Mutual Funds and offers more sense of security to the holders. There are different types of real estate included like residential and commercial real estates. Remember it is one of the best platforms to get passive income along with offering great rental incomes and increasing property value.
4. High Yield Savings Accounts
High yield savings account is the perfect platform to invest or save our earned or reserved money. In the traditional way of savings you can see the safest mode of investments. You can save money and withdraw your money without much requirements. There is a fixed amount of interest rates available to your savings amount, which normally varies from bank to bank (on an Average 6% to 7%).
However, to some extent online savings accounts and cash management accounts provide higher rates of return than traditional bank savings. Cash management accounts offer interest rates which are similar to your savings accounts or more, but typically offered by the brokerage firms and come up with debit cards or checks. Remember some banks limit their savings account transactions to 6 per month.
5. Bonds
Bonds are debt securities issued by the 2 main sectors such as governments or corporations. Bonds are considered as less risk involved and much safer than stock and mutual funds. It provides fixed payments over a specified period, and tends to pay lower interest than high risk bonds. Despite low risk, bonds always offer stable income and make investors opt risk averse.
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Government Bonds
Government bond is a debt security issued by the government in order to support spending and obligations. Normally government bonds are issued by the federal or municipal governments to investors’ interest on the loan over a period of time. Therefore Government bonds are considered as the fixed income securities and labelled as the low risk stream like savings accounts. Interest payments are called coupon payments in Government bonds.
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Corporate Bonds
Operated the same way as the government bonds, corporate bonds are debt securities issued by the corporation or private entities that raise money to grow their business, pay bills and capital improvements. Usually bonds are sold to the investors with higher interest than Govt. bonds and a bit more risk in return. Company will get back that capital if needed and the investor will pay back along with fixed or variable interest rates.
6. Gold and Commodities
Investing in Gold may generate high yield or return to investors against inflation and economic uncertainty. It will help you to diversify an investment portfolio and reduce overall financial risk due to its potentially low correlation with other asset classes. Gold helps you sustain an intrinsic value over a period of time amidst various economic conditions.
Despite Gold, even commodities like physical goods such as silver, oil and agricultural products can also be great options to diversify your portfolio incomes. These commodities will help you during inflations and currency fluctuations like what gold can do.
7. Exchange Traded Funds or ETFs
It is similar to the mutual fund or type of that, ETFs is an investment vehicle that pools a group of securities into a fund. It is similar to individual stock trading, where you can track from the price of the commodities to a wide range of securities. There are various types of ETFs available to investors which includes income generations, speculations and price increases. Interestingly ETFs share prices fluctuate all day, you can buy and sell (Only trade once a day after the market closes) and are different from Mutual Funds.
Finally we are going to conclude that, here you can see major 7 investment platforms. If you are not interested in any of these or want to diversify your income some other ways you can choose certificates of deposits, money market funds, and index funds.
So, make some proper research of a company or funds where you want to invest and study wisely and carefully before going to invest. Do not wait for the perfect time. It is the right time to invest your money and enjoy the compounding return in future.
