After you have gone through the discipline of saving money for investments, you need to understand how and where to invest the money so you can achieve your financial goals. This is essential because many so-called investment platforms are nothing but gambling or Ponzi. Losing your hard-earned money in unregulated, speculative “investments” can be very painful, especially given the discipline it took to save the money for investments.
One of the mindsets you have to do away with when it comes to investments is the get rich quick swindle. The kind of investments that multiply your money steadily over the years is what you should fix your gaze on. While advance in technology is opening up new investment platforms, it is better to stay with the old and trusted options and evaluate the new ones with informed skepticism.
So, without further ado, let us take a brief look at the trusted investment options that will help you grow your money and achieve your financial goals.
Investing in small businesses is one of the tried and trusted investment options. Generally, starting a business comes with a higher risk than the other investment options. However, if done well, it also comes with higher returns. When starting small businesses, it is essential to start a business in a niche you are familiar with and where you possess the knowledge and skills to achieve success. Of course, success is never a guarantee when it comes to starting a business; however, proper preparation is never absent from any successful business.
Here are 50 small business ideas from Small Business Trends.
Buying and selling real estate properties is another tried and trusted investment option. Generally, properties increase in value, especially in locations where demand is rising. When you buy a real estate property, you can wait for the price to rise and sell for a profit or rent out the property to collect monthly rent. The real estate business is primarily about getting good properties (with expected future rise in price) at lower prices. If you are up for the research process that comes with real estate, it is a good investment platform to consider. Robert Kiyosaki is a household name in the real estate business.
Buying stock gives you part ownership of a company. When you purchase shares in a company, you are invested in the activities and financial results of the company. You profit from buying shares by either selling them for a higher price or earning dividends for as long as the company declares a dividend. There are dividend stocks who prefer to pay a part of their net income as dividend while there are growth stocks where the company reinvest earnings and prefer to grow their equity. To invest in shares, you need to have a penchant for analyzing the reports and financials of companies to identify those with a durable competitive advantage (potentials for growth and profit-making into the future)
A mutual fund attempts to take away the hard work of conducting investment research and making investment decisions from individual investors. A mutual fund aggregates funds from different individual and institutional investors to invest in various investment options like stocks, treasury bills, bonds, etc. Investment managers who have the expertise and experience to conduct research and make good decisions manage mutual funds. There are different types of mutual funds we will be considering later on in this series.
A bond is a fixed instrument that represents a loan from an investor to either a company (corporate bonds) or government (treasury bonds). With bonds, you earn interest on your investment (quarterly or bi-annually) and get back the principal amount and interest in the last year of the bond. Bonds are for a fixed period (5-year bond, 15-year bond, etc.), but you can decide to sell at the secondary market. There is an inverse correlation between bond prices and interest rates.
Treasury bills are government securities issued by the department of treasury to finance the government’s budget. Treasury bills are short-term securities with a maturity of one year or less. With T-bills, you pay a discount on the T-bills (which constitutes the interest element) and get the full value of the bill at maturity.
Certificate of Deposit
Banks issue certificates of Deposit with specific maturity dates. They are time deposits that pay a higher interest rate compared to a savings account. You earn interest on the CD and get the principal amount back at maturity.
Agri-funds are investment platforms where you can invest money in a farm for a defined period. The money earns a particular rate of interest for that period, which is payable with the principal amount at maturity. Most agro-funds are insured, giving you a level of confidence in the security of your investments.
Apart from these tried and trusted options, cryptocurrencies, forex, options, and futures are some popular investment platforms. However, I do not personally recommend these platforms. If, after investing in retirement, emergency funds, and these other tried and tested options, you still have some funds to spare, you may consider these other ones. If you want to go this route, ensure you acquire adequate education, and you tread with caution.
What we have done here is just a scratching of the surface. In the following articles, we will take a look at these investment options – the pros and cons, the different dynamics, what you need to do to achieve success, and how to structure your portfolio for maximum returns.