You probably have heard it all before, be smart, make your money work for you. And if you have money to invest, you can make your money work for you. But therein lies the rub, you need money to invest.
Investment money is money outside of what you require to live on, it is a surplus of money that you wish to park some where to make yourself even more money.
Not everyone has that luxury of having surplus cash.
In looking at investing and investments, a few things need to be stated here:
- This is not an all inclusive list of what you can invest in to earn money.
- Risk aversion: You need to know what amount of risk you are willing to take with your money, because no investment is 100% guaranteed to make you money.
- The higher the risk of an investment, usually the higher the rate of return. Riskier investments can pay a higher rate of return or interest on the amount invested.
- Liquidity: How liquid is your investment, meaning how quickly can you access your money if you need it.
So off we go to look at some ways to invest money.
Having a savings account is an investment, and usually a very safe one at that. However, while safe, and easy to access to get your money back, the rates of return currently and for the foreseeable future, are very low.
Some savings accounts are offering less than 1% as the interest rate.
The larger the amount you have to save, some banks will tier the rates, the more you deposit, the higher the rate you may receive.
Investing in property, buying houses or land, has been seen as a safe investment vehicle over the years. The rates of return, either via letting out the property, or selling it have been good. Property can depreciate or go down in value, but historically it has risen in value.
The major issue here is you need money to buy the properties, or take out mortgages, which need to be paid.
There also is the liquidity issue. If you need your money back, you need to wait the time to sell the property, or properties.
Buying your own home is an investment, and one that can pay off over time. You live there, pay the mortgage, avoid rent, and build up equity as an investment.
Buying into or starting a business can be an investment many seek out. In our current times, this can be risky, due to the lock downs and who knows the future.
Investing in your own business is very different than investing with someone else, or in someone else’s business.
Again, some risk here, but the return has the potential to be good, but also can high losses; meaning you can lose all your investment.
Getting into the stock or bond market is a very popular way to invest money, but once again no guarantees, and the risk of the shares or bonds will determine the rate of return.
Some stock and bonds are very solid, due to the nature of the company or bond issuer, the rate of return may be lower, but the chance of losing all your money is also lower.
High risk shares do carry the risk of losing all your investment.
Some shares are very liquid and easy to sell. Some bonds carry a term or time period that you need to carry them before exchanging them and getting your money back.
Investing for the 21st century, Bitcoin and other cryptocurrencies.
These digital currencies have been know to explode in value, and also drop in value just as quickly. So with such a high risk, the rate of return can be high as well.
Cryptocurrencies are not for Investors 101, or the weak of investing heart, you need to fully research and understand these prior to investing any money in them. They are currently unregulated, which adds to their risk.