Mutual funds are a popular investment vehicle. They do carry a risk; however it is still considered one of the safer investments. A mutual fund is overseen by a professional who will invest in numerous securities. The reason this investment vehicle is one of the safer choices is because of diversification. Growing up many of us heard our elders say “don’t put all your eggs in one basket”, well apply that advice when you invest. The chance of all of the investments taking a loss is unlikely. Common sense will tell you that the odds are working with you. Consider you have 30 investments and 15 take a loss and 15 take a gain then you are most likely going to have made a profit or at the very least broke even.
Of course with the good comes the bad. The biggest disadvantage to mutual funds is the fees and lack of control. Investors will pay sales charges and other expenses even if the fund doesn’t perform well. Investors who like to be in control of where their money is going would not be a candidate for mutual funds. The professional handling the account will decide where to invest the money.
Stocks, also known as shares, are a part of a company that you can purchase. Unless you are a big shareholder the company will not consult you on how the company is ran, however you will benefit when the company has good earnings. Stocks are considered one of the riskiest investments, yet you could make a lot of money if invested in the right company. Always keep in mind the bigger the risk the greater the return.
Certificate of Deposits
Investors who want a no risk venture will find peace with Certificate of Deposits (CDs). A CD is a type of account that yields a higher return than a standard savings account. The way a CD works is quite simple you agree to invest your money for a certain amount of time. The institution will pay you interest while holding your fund. These accounts are feeless, unless you choose to withdraw your funds prior to the maturity date. That action will result in penalties, please inquire with the financial institution what those penalties consist of.
As with anything in life read the fine print. Ask if there is any “call” features. A call feature would allow the bank or financial institution to stop the CD after a disclosed amount of time if interest rates drop. If this is a stipulation be sure to have it specified that you will receive the full amount of your original deposit and any accrued interest returned to you immediately. As with any investments always do your research prior to handing over any hard earned money.
In 2001 real estate was the prime investment. Numerous people quit their day jobs to “flip” properties. Unfortunately around 2005 the housing bubble burst and home prices dropped to record lows and our foreclosure rate hit an all time high. Even with all those scary statistics though real estate is considered a lucrative investment if done right.
The most common type of real estate investing is rental properties. A person purchases a home, fixes it up and rents it out. In an ideal situation the rent will cover all expenses on the property and in time the home will appreciate in value. The goal is that years or decades later the property can be sold for a profit.