Once you have your money and are ready to invest, you are probably wondering about all the different ways to invest your money. After you have determined how much you will put aside, when you need your money, took care of debt, and determined your goals; it's time for you to find out what investment is for you and your goals.
There is one investment that you are probably very familiar with, and that is the typical bank account. Here, you can average about 2.5% a year for the money that you have in your account. This isn't the best or smartest way to invest, although it does make for a simple start. The bank account is very popular, and one of the first ways to invest.
CD's, or certificate of deposit, are another type of investment. CD's can be thought of as a type of lending investment. A CD is where you lend your money to a bank for a specific period of time, say 6 months, and they give your money back to you with an interest rate of 6 to 7 percent compounded onto that amount. When compared to other methods, CD's are guaranteed to be a safe investment.
Among the other ways to invest, are bonds. Bonds are a type of investment that is similar to CD's. Bonds themselves can be issued by a bank or company. Bonds have the potential of earning 7 percent over the next four years. When you calculate that investment for 100 dollars, it comes out to about 130 dollars over four years.
Most will agree that the best way to double your money is through the use of the stock market. The stock market has on average returned 11 percent annually. On the other hand, the stock market can also be the most volatile place in which you can lose a lot or all of your money. You must realize that risk early, and be prepared to battle.
Stocks can be thought of as being ownership in a company. Companies issue stock to raise money that will eventually translate into growth. The overall growth of the company will affect the amount of money you have invested in the company.
Before you decide which one is for you, keep in mind that the risk factor plays a big role. If you're a low risk taker that needs the money in a year, a bond or CD would be the best choice for you. If you can sustain a fair amount of risk, you should invest in the stock market. Stocks are the best ways to invest if you don't need the money right away.
Research and history have shown that financial markets will recover. The longer you leave your money in the stock market, the better it will grow to help you achieve your goal. Always remember that the biggest risk is not taking one at all.