Ways to Invest Money
There are many ways to invest money. The ultimate purpose is to have a balanced portfolio reflecting your own risk tolerances and goals.
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The information below represents the main ways to invest money. In my opinion most people do not learn to invest money because they have failed to invest in themselves.
Once they have done this they not only grow their wealth quickly but are much happier with life. I should know, I was one of them!
It is important that you have financial goals that you are striving for so that when money gets tight or more interesting aspects of life present themselves you are not side tracked.
It is also important that you diversify investments so 'all your eggs are not in one basket.'
Having said that when you are starting off you may find that you tend to invest in one area that you are perhaps more comfortable with or knowledgeable about. This isn't a problem providing you diversify as your total net worth increases.
On a weekly or monthly basis you should be putting a little money aside, even if it is only 20 or 30 euros or equivalent, in a bank account. Once your total balance has reached, let's say 500 to 1000 euros then you can start looking at ways to invest money.
You should not leave large amounts of cash in bank accounts because generally you will only get say 2-3% interest. This won't even cover inflation and the devaluation of your currency especially if you live in some western countries at the moment.(2008 and for many years to come) We are in extraordinary times so the best way to invest money is a little different from past thinking because of the need to preserve capital.
For higher rate deposit accounts with fixed interest rates you can deposit a little more, however I personally wouldn't leave anymore than the minimum balance and generally this is too high. There are much better ways to invest money with higher rates of interest and sometimes much smaller notice periods.
Generally accepted safe ways to invest money include bonds and certificates of deposit. A bond is classed as a fixed interest security. It is a debt investment where the borrower (government or corporate) is loaned the money by an investor for a pre determined period at a fixed interest rate. The bond is used to finance various projects.
A certificate of deposit is accepted as being even less of a risk than a bond. This is because you are not loaning your money to anyone. A certificate of deposit (CD) is like a savings account in as much as it is insured. CD's are held for a specific time usually at a fixed interest rate until they mature.
You will receive a much higher rate of interest if you invest your money offshore.
Moving up slightly on the risk scale are managed funds. This is one of the more common ways to invest money in the stock market.
When you buy into a managed fund you are actually pooling your money with other investors. This allows you to buy a diverse range of asset classes eg. fixed interest deposits, bonds, property, equities etc.
Managed funds are suitable for new investors, people with small deposits and people who want to spread risk over a number of asset classes. Each fund is managed by a fund manager who decides what percentage of the fund should be invested in each asset class.
I very good source of information is Liquid Millionaire by multi millionaire Stephen Sunderland. By simply copying what Stephen does you can build a substantial portfolio very quickly. Highly recommended.
Further ways to invest money include investing directly into stocks and shares via a broker. Buying shares of a company is riskier than investing in bonds or certificates of deposit, but the potential upside is greater. For this reason it is better to invest longer term for example 5 years plus.
Stock Value Investing is a very good resource and provides the experience of a long-term value investor who invests for the longer term. It includes buying and selling strategies and ways to track performance using the internal rate of return (IRR), and many other valuable investing insights.
That's not to say however that large gains can't be made in much shorter periods. Some companies elect to pay profits direct to their shareholders in the form of a dividend. This can be a very tax efficient way of receiving income.
The foreign exchange market is one of the more lucrative ways to invest money. The foreign exchange market is in fact the largest market in the world trading some $4 trillion daily. An investor will make money by simultaneously buying and selling foreign currency. Just like the stock market you have to know what you are doing.
Having said that you can have professional traders do it for you. An investment which I'm very keen on and is managed this way has made some fantastic gains since it began in 2005, even with the current recession. If you would like further details please go to managed forex trading.
So you should be thinking about paying off debt as quickly as possible. Credit cards with high interest rates should be paid off first, followed by loans. If you have a mortgage on the house you live in you should definately be making an attempt to pay it off more quickly. You will save thousands....
For example: taking a normal repayment mortgage over 12-15 years instead of 25 years. Over 25 years you will pay mostly interest back in the first few years whereas over 12-15 years you will pay mostly capital back.
Speaking of property this is an excellent way to add equity to your portfolio even if it is just your own residential home. If you want to buy rental property then a good resource I use is The Property Tycoons Forum.
Gold investments are high profile investments at the moment (2008 and onwards) because we are in a bull market (gold is increasing in value) and people are having less confidence in their own fiat currency and government policy. Physical gold however should only be looked as an insurance policy and therefore it is not wise to put more than approximately 5-15% of your portfolio in this asset. Try Bullionvault for your physical gold purchases.
Short term investments such as Options and Futures are at the higher risk end of ways to invest money. In my opinion only more experienced investors should be looking at these more speculative investments, however that is not to say you couldn't use a paid trading service such as moneymappress.
Another important way of investing money, making big profits and having a lifestyle rather than a workstyle is to start a small business.
My own preference is an internet business which will give you the freedom of doing what you want when you want in whatever country you want and also with very low start up and ongoing costs.
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"An investment in knowledge always pays the best interest"
"Life is full of uncertainties. Future investment earnings and interest and inflation rates are not known to anybody. However, I can guarantee you one thing.. those who put an investment program in place will have a lot more money when they come to retire than those who never get around to it."