You want to invest your money in order to make it grow, but do not know where to? The following is a list of 9 major investment alternatives on the market, which will help you choose the right one for you.
Each alternative includes a brief description of it, its main advantages and disadvantages, and a personal comment that will help you compare better with others.
Shares are securities that some companies issued in order to finance itself, and give it to whoever possesses certain rights such as the right to receive dividends if the issuing company for the distributed profits.
Investing in stocks involves buying these securities in order to sell them later at a higher price than they had when you purchase them (and make a profit), and / or receive dividends (and get an income).
Advantages of actions:
- They have a high potential of return (by investing in stocks can get a higher return than they could get by investing in traditional investment instruments such as savings accounts and time deposits).
- You do not need much capital to start investing in them (although it should be noted that because of the fees to be paid at the time of purchase, invest in them a small amount may not be profitable).
- They have a high degree of liquidity (stocks can be easily converted into cash and that can be sold quickly).
Disadvantages of actions:
- Carry a high risk (a market, where quoted, is a highly volatile market where any economic, political or social event can greatly affect the value of a stock from one moment to another).
- You need to have technical skills that allow one to properly invest in them.
Investing in stocks is an attractive alternative where an investor can earn a good return on their money, but usually when you invest in the medium or long term and have enough patience not to rush to sell before the first fall market.
The bonds are debt securities that some companies, governments and other entities issued in order to finance itself, and give it to who owns the right to receive periodic interest payments are fixed in advance and do not change during the life of these.
Investing in bonds involves buying these securities in order to receive the periodic payment of interest, and get an income.
Advantages of bonds:
- They offer greater potential than other fixed income instruments such as savings accounts and term deposits profitability.
- They are a low-risk investment (before investing in a bond you know how are the interests that will receive and is confident that these will not change until the bond matures).
- It is not required to have the technical knowledge to start investing in them.
Disadvantages of bonds:
- They offer little potential returns compared to equity instruments such as stocks.
- Unlike other fixed income instruments such as savings accounts and term deposits, are not usually insured by government entities, so the risk that the issuer does not pay interest promised in bankruptcy runs.
Investing in bonds is a good alternative for those who would like to receive periodic interest payments and that due to its low tolerance for risk, they also like to know in advance how much they’re going to get and what is the term that will be invested your money.
Investing in real estate is to physically buy property such as houses, apartments, shops, offices, land, etc., in order to later sell at a higher price than they had when you purchase them (and make a profit) and / or rent them (and get an income).
Advantages of real estate:
- They offer high-profit potential (investing in real estate can be quite profitable, but generally in the medium or long term).
- They are an investment; generally safe (the value of real estate hardly decreases and, conversely, tends to increase over time).
- They are a relatively simple investment (little technical knowledge is required to start investing in them and then to manage, at least compared with other investment instruments such as stocks).
Disadvantages of real estate:
- You need to have a good capital to start investing in them.
- You need to have market knowledge that allows one to choose the right property, and then ensure that this increase in value or can be rented quickly.
- They have a low degree of liquidity (not easy to convert a property into cash, since usually takes the time to find a buyer for it).
Investing in real estate is one of the best investment alternatives that exist because it allows one to have an asset that hardly loses its value and that, despite falls that may have, in the long term (about five, ten twenty or thirty years) is likely to be worth considerably more than it is worth now.
The mutual funds are funds formed by contributions of money from individuals and / or legal entities, which are collected, managed and invested in other financial instruments in order to make them grow, fund management companies.
Investing in mutual funds involves buying shares of these funds in order to subsequently sell them at a higher price than they had at the time of purchase, and make a profit.
Advantages of mutual funds:
- They are a low-risk investment (investment money from a mutual fund are made by professional investors and diversified way).
- You do not need much capital to start investing in them (most mutual funds allow you to start investing in them with just $ 100).
- They are a simple investment (not required more financial knowledge to start investing in them).
- You can invest immediately in them (it’s just a matter of approaching any fund management company or any bank that offers this product, ask about the types of mutual funds they offer and request the opening of one).
- Have a high degree of liquidity (money invested in a mutual fund can be easily converted into cash since one can have this at any time).
Disadvantages of mutual funds:
- They offer little potential returns compared to other investment instruments such as stocks and real estate.
- You have little control over them (investment money from a mutual fund are made by the fund management company).
- It is necessary to pay commissions to the fund management company.
Mutual funds are ideal for those who would like to get a return on their biggest money they could get with traditional investment instruments such as savings accounts and term deposits option, but they do not have the necessary knowledge to invest in other more complex instruments such as stocks, or are not willing to risk that this entail.
The deposits are accounts managed by banks and other financial institutions offering payment of certain interests to put and keep their money in these for a period of time.
Invest in deposits involves placing money in these accounts in order to collect interest offered once fulfilled the agreed deadline.
Advantages of deposits:
- They are a safe investment (before investing in a term deposit you know what interest they will receive and what is the term that your money will be invested).
- You do not need much capital to start investing in them.
- They are a simple investment (it is only a matter of approaching a bank or a financial institution offering this product, ask about the types of deposits offered, and request the opening of one).
Disadvantages of deposits:
- Offer little potential return (usually offer higher than those offered by savings accounts profitability, but lower than those offered other alternatives increased risks such as mutual funds and stocks).
- Have a low degree of liquidity (once invested money in a term deposit, one cannot have this to meet the agreed deadline; unless you pay a fine is usually high).
Time deposits are the right choice for those who are risk averse, but would like to get a return on their biggest money they could get by putting it in a savings account, in exchange for not touching it for a period of time.
Investing in currencies is to buy currencies such as Dollars, Euros, Yen, Pounds, etc., in order to subsequently sell them at a higher price than they had at the time of purchase, and make a profit.
Advantages of currencies:
- They offer high-profit potential (investing in currencies can be quite profitable, but also quite risky).
- Not much capital is required to start investing in them.
- You can invest in them at any time and from anywhere in the world (is invested in them through the Forex market, which is fully electronic).
- They have a high degree of liquidity (currency can easily be converted into cash, as there is always someone willing to buy them).
- Usually, the agents through which buy offer leverage to investors, giving them the possibility to operate with a greater than the amount invested.
Disadvantages of currencies:
- Carry a high risk (the foreign exchange market is a highly speculative and volatile market, where any economic, political or social events can significantly affect the value of a currency from time to time).
- You need to have technical knowledge that allows one to invest properly.
Investing in currencies is an alternative where they can earn enough money in a short time (due mainly to the possibility of leverage), but also presents a high risk, especially if you do not have the knowledge and proper preparation.
Investing in gold is to buy gold, either directly (for example, through bullion or gold coins) or indirectly (e.g. through certificates of deposit of gold or investment funds specializing in gold), with in order to later sell at a higher price than it was at the time of purchase, and make a profit.
- It offers a good potential for profitability (investing in gold is profitable, but, generally, in the long run).
- It is a safe investment (the value of gold hardly decreases mainly because not regulated by governments, but is determined by supply and demand and, on the other hand, tends to increase over time because every time there is higher demand and lower supply).
- It is a simple investment (little financial knowledge needed to start investing in it).
- It has a good degree of liquidity (gold can easily be converted into cash since it can be sold at any time).
- Its value is unstable in the short term.
- It does not provide any income.
- In the case of buying physical gold, requires care and maintenance, and the risk that it could be stolen run; and if they leave custody in a bank, you need to pay a high price for it.
Investing in gold is considered an investment haven that investors often make in times of crisis in order to prevent the value of its money diminish; but also often it considered a profitable investment in the long run because eventually their value tends to increase because more and more investors and fewer gold reserves.
Artworks and collectibles
Investing in works of art and collectibles is to purchase paintings and sculptures by renowned artists, as well as jewelry, stamps, coins, antique books, among other items, so expect to increase their value as a result of the passage of time, and thus sell at a higher price than they had when you purchase them.
Advantages of artworks and collectibles:
- They offer good potential for profitability (investing in works of art or collectibles, in some cases, it can become quite profitable in the long term).
- They are a simple investment (just a matter of buying the artwork or collectible and keep it at home or leave custody in a bank).
- They possess they give you a sense of satisfaction and enjoyment, especially if it is a collector or likes the kind of work of art or collectible acquired.
Disadvantages of artwork and collectibles:
- Do not provide any income (unless they are given for rent to some art gallery or a museum).
- Require considerable care and maintenance (any cracks or damage may decrease some or all of its value).
- There is a risk that can be stolen or destroyed in a fire or other disaster, and where to purchase insurance, this usually has a fairly high cost.
- You run the risk of being scammed (that one would sell a counterfeit part, or worse, stolen).
- They have a low degree of liquidity (works of art and collectibles are not easily converted into cash, since it is not easy to quickly find a buyer for these).
Investing in works of art and collectibles is a great alternative for collectors or for those who like a work of art or collectible particular object; but also for those who want to diversify their investment portfolio or just want to give this a touch of class.
Investing in business is to create a business from scratch, buy a business that is already running, or finance the business of a third party in order to make a profit or sell it at a higher price than it had at the time of purchase (in the if you create a business or buy one), or get a percentage of profits (in the case of financing the business of a third party).
Advantages of business:
- They offer high-profit potential (investing in businesses can be quite profitable, as long as the business is chosen and indicated this is administered efficiently).
- In the case of creating a business or buy one, you have full control on investment (profits and increased business value depend on one).
- If you have good results, they give one the satisfaction of having been responsible for the good return on your investment.
Disadvantages of business:
- Carry a high risk, especially if you do not have adequate knowledge and skills.
- Usually, you need to have a good capital to start investing in them, especially in the case of buying a business.
- You need to have knowledge and business skills both to invest in them to manage them.
- Have a low degree of liquidity (money invested in a business is difficult to convert into cash because, among other reasons, it is not easy to quickly find a buyer for a business).
Investing in business is the ideal choice for those who like the issue of business and have full control of their investment (in the case of creating a business or buy one), or who like the subject of business but alternative does not have the time or expertise to manage one (in the case of financing the business of a third party) will.