There are many different ways you can invest your money. Your choice depends on how much risk you want your investments to have. Sometimes the riskier the investment, the more money you could make. But then you have a greater chance of losing your investment as well. Most financial advisers recommend that you have a combination of high, moderate and low risk investments in your portfolio.
Here are some ways you can invest:
These are available at most credit unions and banks and are a very low risk – but the return on your investment (how much money you can make) is also pretty low. But, they pay a higher interest rate than a regular savings account. You purchase a CD at a predetermined amount, time period and interest rate. Once your CD’s time period is up, it called mature date, you can either collect your investment and interest or reinvest it into another CD.
Also offered by credit unions or banks, a money market account offer a higher interest rate but usual require a higher minimum balance. This type of account restricts how many withdrawals you can make over a period of time.
A mutual fund is made up of a pool of funds from numerous investors. Each investor shares in the profits and losses of the fund. A money manager for the fund will oversee what stocks, bonds, etc. those funds get invested in. You can usually preset your risk level.
When you buy a U.S. bond, you’re lending the federal government money and getting interest on that loan. There are two kinds of bonds: EE Bonds and I Bonds. EE Bonds are discount bonds and you only pay half of their face value. I Bonds are sold at face value. Both earn interest and both are very safe investments. Just keep in mind that your money will be locked up in the bond for years.
Stocks are the riskiest investment but you can also make a nice profit on them. You pay a company to become a stockholder and own shares in that company. If the stock appreciates, it raises in value and you make a profit. If the stock depreciates the value goes down and you lose money. You’re paid in dividends that you earn quarterly.
The best place to start is to figure out what your financial goals are, how long you have to achieve them and then make your investing decisions using that information.