Knowing where to put your money has always been a sensitive topic. These turbulent times cause a lot of uncertainties to the point that most people would rather cave in to their comfort zones than make a risk in investing their money in a shoestring budget. Investing has always been about learning to make risks to gain bigger profits. Most often than not, investments that are high risk, have high returns while investments that are low risk, have low returns. On the other hand, some investments guarantee returns, others do not.
Investing is not for the faint-hearted. If you have the stomach for it, then proceed with the next steps. One of the first few things that you need to do is to determine your financial and personal goals. Is it a long-term or a short-term goal? When exactly do you need the money? Do you want a high return or a low return? How much risk are you willing to take? Once you are clear with your financial and personal objectives, the next step is to determine the type of investment you should take.
Where to Invest
There are different types of investments that you can make to grow your moneyand to hopefully achieve your projected return. It is important that you know the pros and cons of each type before you plunge in. Here are the most common types of investments:
Stocks
Stocks are also known as shares and cant be compared to forex market, because owning a stock allows you to share ownership of a company or allows you to own some part of the company. The more stocks you own, the more ownership you have. Investors who own stocks of a certain company gain profits through dividends. Dividends are basically the profits of the company that are divided among stock owners. So the more stocks you have, the more dividends you will receive if the company is profiting.
There are two types of stocks, the common stock and the preferred stock. Common stocks have higher risks and higher returns than preferred stocks. Common stocks provide the highest returns, but in cases of company bankruptcy or loss, common stock owners are the last one to receive money. The creditors, bondholders, and preferred shareholders will be the first ones to receive money when the company folds; on the other hand, the common stock shareholders come last. Preferred stocks do not have the same investment returns and rights as common stocks. Preferred stocks receive a fixed, guaranteed dividend all the time. If you are not so much of a risk taker, you can invest in preferred stocks.
Bonds
Bonds are issued out by the government and corporations to those who would like to lend their money for a profit. Bonds, also known as securities, are said to be risk-free investments making them a low return investment in general.
Mutual Funds
When you invest in mutual funds, you allow commercial entities or other people to invest your money for you in various stock options. These commercial entities are normally financial experts and they basically collect money from various investors and individuals so that they could invest the money and gain profit from it. The returns that you will receive are shared on the basis of your individual contribution in the total sum. Mutual funds are known to be less risky compared with stock markets simply because you are sure your money is being invested by professionals or experts.
