Investments for Beginners: How To Invest Your Money Wisely
Everyone reaches a point in their life when they start to consider their financial future. Whether your aim is to buy a car, a home, or support a family, investing is important because it provides long lasting financial stability. Investing money in a way that fits your personal goals and needs is not a difficult thing to do, even if you have no background in personal finance or even basic investment strategy. There are simple ways that you can put your money to work for you using a variety of easy to comprehend investment options.
The most simple and secure way to begin saving money is with a bank. When you put your money into a bank, they pay you a certain amount of interest just for letting them keep your money. Usually banks will typically pay around 0.5-1.5% compound interest on the money you deposit with them. Compound means that interest is added to your principle deposit over time, then that interest becomes part of your money so it can also accumulate more interest for you. This method of investing is considered very low risk, but also carries a low return rate on your money.
Another way to invest your money is through purchasing stocks. When you buy a stock you are investing in a company by becoming a partial owner of that company. Each company has a certain number of shares that are owned by people and also other companies. Investing in the stock market caries with it a high amount of risk, but it can also be very lucrative with annual returns of 10-15%. If you plan on investing in stocks, I would suggest doing a fare amount of research into each company you are considering. Make sure that they are stable and have a history of consistent profitability. NYSE.com is a great place to start exploring and researching possible companies to buy stock in.
Investing in bonds means that you are basically lending money to a municipality, the government, a corporation, or a federal agency. In return, you are given a promise, or "bond", that they will pay you a set amount of interest throughout the life of the loan, and also repay the principle of the bond at the end of this term. Bonds usually pay interest semiannually so they can be considered a solid source of income or savings. This form of investing is considered fairly low risk, and it also carries with it a rate of return slightly higher than you will find with a bank, but lower than stocks because there is less risk involved.
Mutual funds offer easy investment diversity by allowing you to join up with hundreds or thousands of other people to invest in a portfolio of real estate, stocks, bonds, and other securities. There are thousands of different types of mutual funds ranging from technology and health care to socially responsible funds that do not invest money in companies that deal with tobacco, firearms, alcohol, etc. The great thing about mutual funds is that you can research and choose a specific fund that suits your own investing needs. These funds also only require small initial investments, usually a few hundred or few thousand dollars. Mutual funds provide stable growth without the volatility of stocks. Investment return rates are slightly less than that of stocks, but larger than bonds, again this is directly related to the amount of risk involved with the investment.
CD's or Certificates of Deposit
A CD is best described as a cross between a savings account with a bank, and a bond. With a CD you are lending money to the bank for a specific amount of time, and the bank agrees to pay you a set amount of interest on this money throughout the life of the loan. When your CD matures at the end of this term, the bank also returns the money you originally gave them. CD's can range in amount from a few hundred to a few thousand dollars, and terms are usually between one and five years. This method of investing your money carries a very low risk factor, and usually a considerably low rate on return. The best way to make money with a certificate of deposit is to get a good interest rate (around 1.5%), and invest a good sized chunk of money (a few thousand dollars).
Start Saving Serious Money Now With 5 Helpful Tips!
The most important things to consider when investing your money is to do some research, set measurable financial goals, and design an investment strategy that fits your needs. Decide how much of a return on your investment you want to achieve and also if you can afford to take the necessary risks. It helps to consult a financial planner for advice on where you should begin. I hope this information helps you get on your way to successfully putting your money to work for you!