What should i invest in to make money - opinion
Wise investors know not to blindly put all their eggs in one basket. Instead, they become familiar with a few different types of investments and use their knowledge of each to make money in different ways.
When it comes to investing, there are a lot of baskets to choose www.oldyorkcellars.com, it’s important to understand all your options before you actually invest your money and start to build your portfolio.
Every type of investment has its upside and downside. The best types of investments to make depend on your risk tolerance, level of understanding of certain markets, timeline to avoid capital gains, and reasons for investing in the first place.
Among the different types of investments out there, there are probably a few that will work well for you so lets get into it.
Cash and Commodities
Cash and commodities are typically considered low-risk types of investments, so if you’re new to investing or are very uncomfortably with any risk, one of these options could be a good place to start. Keep in mind that low-risk investments also tend to have low returns.
1. Gold
Yes, you can invest in gold and other commodities such as silver or crude oil. In fact, the practice of investing in gold goes way back, but that doesn’t necessarily mean it’s a great investment. Gold is a commodity, so its price is based on scarcity and fear, which can be impacted by political actions or environmental changes.
If you are investing in gold, be aware that your moat (protection against a price drop), is based on external factors so the price can fluctuate a lot, and quickly. The price tends to go up when scarcity and fear are abundant and down when gold is widely available.
If you think the world is going to be a more fearful place in the future, then gold could be a good investment for you.
Key Takeaway: The thing to remember is that betting on commodities such as gold is usually just that — betting. It’s not Rule #1 Investing unless you KNOW that scarcity is going to create a demand for gold and drive up the price.
2. Bank Products and CDs
Bank products are investment types offered by banks that include savings accounts and money market accounts. Money market accounts are similar to savings accounts, but typically earn higher interest rates in return for higher balance requirements.
A CD, or certificate of deposit, is another type of bank product. When you purchase a CD you agree to loan the bank an amount of money for a designated amount of time in order to earn a higher amount of interest on it than you would in a typical savings account.
CDs are an extremely low-risk investment but with low risk, comes low reward. Most banks offer CDs at a return of less than 2% per year, which is not even enough to keep up with inflation.
Key Takeaway: Don’t waste your time on CDs. While they can be a safe place to save your money and get a little more interest than you would in a savings account, they aren’t a great place to grow your money.
3. Cryptocurrency
Cryptocurrencies are one of the newer types of investment. They are unregulated digital currencies bought and sold on cryptocurrency websites.
Cryptocurrencies, such as Bitcoin or Dogecoin, have gained a lot of interest in recent years as an investment vehicle due to their quick and dramatic growth. However, they remain an incredibly risky investment because of the many unknown factors associated with them.
There is the possibility of government regulation and the possibility that cryptocurrency will never see widespread acceptance as a form of payment. Cryptocurrency currently has no intrinsic value and it could disappear as quickly as it came into existence.
How to Invest in Bitcoin
In the same way that you are able to exchange US Dollars for any other currency such as Yens or Euros, you can also exchange your US Dollars for cryptocurrencies.
Though cryptocurrencies arent technically part of the Forex market, the mechanics of investing in cryptocurrencies is very similar. The hope of many cryptocurrency investors is that the value of those cryptocurrencies goes up against the dollar, and they are relatively simple to buy online.
Someone who invested in Bitcoin in and sold it today would certainly make some incredible profits. The problem is that theres no way to time the cryptocurrency market. Bitcoin and other cryptocurrencies could continue to dramatically increase in price, or they could drop to zero.
Key Takeaway: Take my advice and stay away. At this point, no one knows for sure what the future holds for cryptocurrencies, so investing in cryptocurrencies is little more than speculation. We don’t invest in things we don’t understand because that’s just gambling.
Bonds and Securities
Bonds and securities are other types of low-risk investments. Bonds can be purchased from the US government, state and city governments, or from individual companies.
Mortgage-backed securities are a type of bond that is typically issued by an agency of the U.S. government, but can also be issued by a private firm.
4. U.S. Savings Bonds & Corporate Bonds
When you purchase any kind of bond, you are loaning money to the entity you purchase it from for a predetermined amount of time and interest.
Bonds are considered safe and low risk because the only chance of not getting your money back is if the issuer defaults. U.S. saving bonds are bonds backed by the U.S. government, which makes them almost risk-free.
Governments issue bonds to raise money for projects and operations, and the same is true for corporations who issue bonds.
Corporate bonds are slightly more risky than government bonds because there’s more risk of a corporation defaulting on the loan. Unlike when you invest in a corporation by purchasing its stock, purchasing a corporate bond does not give you any ownership in that company.
An important note to remember is that a bond may only net you a 3% return on your money over multiple years. This means that when you take your money out of the bond, you’ll actually have less buying power than when you put it in because the rate of growth didn’t even keep up with the rate of inflation.
Key Takeaway: There is nothing “safe” about running out of money in retirement because your rates of return couldn’t keep up with inflation while you were trying to grow and protect your money. It’s not worth it to put your money in bonds.
5. Mortgage-Backed Securities
When you purchase a mortgage-backed security, you are once-again lending money to a bank or government institution, but your loan is backed by a pool of home and other real estate mortgages.
Unlike other bonds, which pay the principal at the end of the bond term, mortgage-backed securities pay out interest and principal to investors monthly.
Key Takeaway: While they can be a type of income investment that provides steady returns, mortgage-backed securities are one of the more complex investment types, and so should be avoided by beginner investors.
Investment Funds
Investment funds are made up of a pool of money collected from multiple investors that are then invested into many different things including, stocks, bonds, and other assets. The collection of investments typically tracks a market index.
6. Mutual Funds
A mutual fund is a type of investment fund operated by a money manager who invests your money for you, and attempts to get good returns.
Mutual funds are typically made up of a combination of stocks and bonds, however, they carry less risk because your money is diversified across many stocks and bonds. You’ll only reap rewards from stock dividends and bond interest, or if you sell when the value of the fund goes up with the market.
The average individual will need more than $3 million to be financially independent in retirement in twenty years and, frankly, mutual funds wont get you there.
When it comes to value, remember that mutual funds are built and managed by so-called “financial experts” who have a hard time beating the market, especially when you factor in the fees theyre charging you to manage your money in the first place.
Rule #1 Investors expect a minimum annual compounded rate of return of 15% a year or more. If we can get that, we don’t care what the market did because we’re going to retire rich anyway.
Key Takeaway: You’ll have a much easier time (and more fun!) learning how to invest your own money rather than relying on some mutual fund manager who can’t beat the market.
7. Index Funds
Similar to mutual funds, index funds are one of the types of stock investments that diversifies your investment across multiple stocks. The difference between index funds and mutual funds is that index funds are passively managed, not directly overseen by a money manager.
Because index funds are passively managed, there are less fees involved, which means you have the potential for slightly higher returns than with a mutual fund. However, your returns will be based entirely on how well the index your fund is tracking does.
Given that most major indexes are used to track the overall movement of the market, they perform about as well as the overall market does in the very long term. In other words, they tend to yield an average return of about 7% per year.
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While fancy material things may help you keep up with the Jones’ on your block, the benefit is ultra temporary. It’s so important to live within your means and spend your money wisely so you can afford the life you want in the future.
Avoid these common money traps and you’ll have more money for the good things to invest in both now and in the future.
Warning: Putting your money into expensive possessions or setting it in a savings account because you think it’s “safe” will only hurt you in the long run.
None of these are investments—they’re money traps. Like cars and boats, money sitting in a savings account is losing value over time. Put your money into the only type of investment that’s guaranteed to make you money—the stock market.
What Are the Best Types of Investments for Beginners?
Everyone’s reasons and personal risk tolerances are different, so you have to decide for you which investment types suit your lifestyle, timeline, and goals best.
I’m not your financial advisor, and this is for entertainment purposes ONLY but here’s what I would do:
- First, I’d open up a Roth IRA and invest for retirement so my money can grow tax-free.
- Then, if I just wanted to invest my money with little research and forget about it, I’d put a chunk of it into an Index Fund such as the S&P or the Russell
- Lastly, but certainly not the least of these, I’d invest in the stock market.
Well get into how to invest in stocks in later chapters. But its important to note that of all types of investments we covered the stock market is the best place to invest with a small amount of money and still get big returns.
So, how much money exactly do you need to get started? More on that in the next chapter >>
Phil Town
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phils goal is to help you learn how to invest and achieve financial independence.
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While fancy material things may help you keep up with the Jones’ on your block, the benefit is ultra temporary. It’s so important to live within your means and spend your money wisely so you can afford the life you want in the future.
Avoid these common money traps and you’ll have more money for the good things to invest in both now and in the future.
Warning: Putting your money into expensive possessions or setting it in a savings account because you think it’s “safe” will only hurt you in the long run.
None of these are investments—they’re money traps. Like cars and boats, money sitting in a savings account is losing value over time. Put your money into the only type of investment that’s guaranteed to make you money—the stock market.
What Are the Best Types of Investments for Beginners?
Everyone’s reasons and personal risk tolerances are different, so you have to decide for you which investment types suit your lifestyle, timeline, and goals best.
I’m not your financial advisor, and this is for entertainment purposes ONLY but here’s what I would do:
- First, I’d open up a Roth IRA and invest for retirement so my money can grow tax-free.
- Then, if I just wanted to invest my money with little research and forget about it, I’d put a chunk of it into an Index Fund such as the S&P or the Russell
- Lastly, but certainly not the least of these, I’d invest in the stock market.
Well get into how to invest in stocks in later chapters. But its important to note that of all types of what should i invest in to make money we covered the stock market is the best place to invest with a small amount of money and still get big returns.
So, how much money exactly do you need to get started? More on that in the next chapter >>
Phil Town
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, what should i invest in to make money, share a passion for horses, polo, and eventing. Phils goal is to help you learn how to invest and achieve financial independence.