Most of the investors invest money with the opinion of getting sky-high returns as soon as possible with little or zero risk of losing the principal money. This is the primary reason for investors to look out for the best investment plans to double their money in a very small amount of time with no risk. Fortunately, there are a lot of options available varying as per the risk and returns.
However, when trying to sorting out where you should invest money, it’s best to go with the basics first. These basics refer to goals establishment of the investments and mediums to accomplish each and every goal.
What Should be the Investing Belief of Investors (Beginners)?
Whenever investors invest money either they are amateur or pro, they are buying a portion of a company or a commodity with a belief of the company or commodity has the potential to grow over time.
Note: You should never forget investing is not a shortcut for become rich, but a constant way to grow the wealth you already have. Some of you might worry about not having enough money stored and here you are wrong. Investing doesn’t require you to have lots of money to get started. It’s been seen even a small sum of money can be turned into a fortune due to the compounding interest principle if selected the right investment.
Where Should You Invest Your Money?
There are plenty of options, you can invest your money into. Out of the many most common and popular options are:
The Stock Market
The most common and highest volatile option for an investor is to put money into the stock market. When you buy shares, you get a small portion of the business you bought into.
When the company declares profits, shareholders get a portion of the profits in terms of dividends depending upon the no. of shares owned. Also when the value of the company increases, so does the price of the shares you own, which means you can also sell them at a higher price for profit.
When you buy investment bonds, it means you are lending your money to either a business or the government ( for US investors, they can buy foreign funds to loaning money to a foreign government such as the US government, etc).
Investors get an interest on the loan over the duration of a bond. Bonds are considered less risky than stocks, so does their potential for returns.
Instead of buying a single stock, mutual fund lets you get a bucket of stocks in a single purchase. These stocks are chosen and managed by a mutual fund manager.
Note: These mutual fund managers charge a fee based on percentage when investors put money in their mutual fund. Generally, this percentage-based fee makes it very difficult for investors to beat the market after investing in mutual funds. Moreover, most mutual fund investors fail to beat the stock market.
The least risky and at the same time worst investment option available to you is to put your money in a saving account and collect interest on it. Low risk means low to no returns.
However, saving accounts can be of great use when stockpiling a risk-free sum of cash which further can be used to purchase other investments or meet uncertain emergencies so your other investments remain untouched.
Physical commodities are those investment commodities that investors physically owns such as silver or gold. These commodities are often playing as a safeguard against hard economic times.
Where to Invest Money to Get Good Returns?
Investing money for small returns is way easy and mostly risk-free. For instance, you can invest your money in bonds i.e., US treasury bonds and you will be guaranteed to get 2-3% returns on your investment annually.
The problem with this amount of return is – it’s not enough for many people out there investing to reach their retirement objectives.
To accomplish your retirement goals you actually need to seek out other options with higher returns.
The best place to find such kind of returns is on the stock market with our golden rule no 1 i.e., investing and buying wonderful companies.
Who are wonderful companies?
They are basically the one who is growing and will continue to grow with the years and so, tackling all the obstacle market is throwing at it all along the way.
With these companies, you can easily expect an average annual return of 15% or upwards.
There are other options as well which are a less desirable option also included.
A. Index Investing :
Index investing is basically S&P 500 – which index 500 biggest US Companies and a pretty good portion of the overall stock market with an average annual deliverance rate of 9% to 10%.
It means all you have to do is dump your money into S&P without wasting any time in doing research or choosing stocks, one could easily make 3-4 times of the money invested in bonds and upwards of 10 times or more of money if you would have put it in saving’s account.
401(K) is another method of investing in the stock market. The actual value of 401(K) estimated if your employer is willing to match a portion of your contributions.
This is basically doubling your investment regardless of the market and it is something one should take advantage of if getting an opportunity.
It is though less desirable too once you have reached the maximum amount that your employer can match for the year.
So, what’s the best way to invest money?
Out of the options available, the stock market is the best and most potential option you can go for. But you just can’t put your money blindly and can expect to have great gains.
So, in order to be successful, you need to follow a system and a strategy. For now, let me tell you the most effective investment strategy available – Rule #1 Investing…
Table of Contents
- 1 What Should be the Investing Belief of Investors (Beginners)?
- 2 Where Should You Invest Your Money?
- 3 Where to Invest Money to Get Good Returns?
- 4 Who are wonderful companies?
- 5 So, what’s the best way to invest money?