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Where should I invest money to get good returns? There is nearly always risk associated with any type of investment. What you need to do is weigh out the risk versus the potential return. When I was young, my grandfather told me to use 1/3, save 1/3 and invest 1/3 of whatever I earned.
Obviously, this depends very much on how much you earn, but if you can afford to save and invest at the same time this is good advice. The difference between saving and investing is that investing has a much higher potential return but also higher risk.
In the face of recession and redundancy, it becomes all that more important to invest wisely and make the most of your investment decisions.
I have set up this site for people to share information on ways to invest money and openly share which methods work well and which don’t so that others may learn from their experiences. Let us now consider some of the ways to invest money.
I am not saying that these are the best ways, or that one way is better than another. It depends on your individual circumstances, how much disposable income you have and how much risk you are prepared to take.
What can I invest in to make money?
1. Property – Most people aspire to own their own home so they have somewhere to live when they retire without having to pay a large monthly rental or mortgage.
In my opinion, this is a good investment because you always need somewhere to live. And if you can earn enough to buy a second house outright then you will be able to live in one and live off the rental from the other.
2. Pension funds – Most people will invest a certain proportion of their income in a pension fund for retirement. This used to be seen as a safe way of investing although in recent years with the collapse of some private pension funds you need to consider your options very carefully.
3. Health insurance – Although this does not need big investment, remember that if you are unfortunate enough to face a large medical bill you may have to sell your house or your savings to cover it. Good health insurance is a very good investment.
The above types of investment are probably the safest ways to invest your money but if you have done well and can afford a bit more risk on speculative investments, you can consider some of the following.
4. Stock Purchase Plans – you can invest in the stock market even with as little as $20. WIth small amounts of money, you can invest through Dividend Reinvestment Plans (DRPs) or Direct Stock Purchase Plans (DSPs) which allow you to buy directly from the companies instead of going through a broker.
There are over a thousand corporations offering such plans and make it worthwhile to invest amounts as low as $100 or even $20.
Basically, these investments allow you to reinvest your dividends and slowly grow your investment.
5. Index funds – Index funds are a good option if you have a few hundred dollars to invest. An index fund generally tracks an index such as the Dow, the Nasdaq, or the S&P500.
The S&P 500 index is an index which is based on 500 leading companies in main industries. Some such as IRAs (Individual retirement accounts) allow you to invest as low as $250. The benefit of investing in index funds is that they have low costs as they simply track the index so you don’t have high management costs.
The 2 main ways to invest in index funds are through mutual funds or through ETFs (exchange traded funds) which have an annual charge for managing the funds.
When investing in an index fund you should keep your transaction costs less than 2% of the value of the transactions so if you invest $500 you should ensure the transaction cost is nor more than $10. This is why it is not suitable for small transactions of $20 or $100.
6. Discount brokerage account – These types of account allow you to purchase stocks, bonds, mutual funds, and other investments by paying professionals to buy or sell the investments you tell them to.
You pay them a commission on each trade which can range from $5 or $10 for a discount broker to as much as a few hundred dollars for traditional brokers.
Traditional brokers provide a range of other advice and services while discount brokers usually just act on your own decisions. You should only invest money in the stock market if you have good reason to believe your investment will improve. It can be a gamble.
I used to work for a large multinational and was given $500 worth of stock options when I joined. I held onto these while the price increased from $23 to $45 per share… but I did not sell and within a few months, it had dropped back down below $23.
So if you are well informed and invest wisely there is a potential to double your money but then again if you buy at the wrong time, you can lose everything!
7. Forex Trading – can also be profitable and a good option if you have $500 or more to invest. It basically involves buying once currency at a specific exchange rate and selling it when the exchange rate moves in your favor.
Because exchange rates fluctuate constantly, forex trading is based on making a large number of small transactions every day. You just need to open an account for Forex trading with a recognized broker and they will complete the rest of the formalities.
You then need to understand the basics of forex trading and get ready to buy and sell. You can get automated robots which will make the trades for when the currency reaches your specified amounts, and you can limit your risk by setting limits for each trade.
8. Business Startup – You could decide to set up a new business in a field that you are familiar with. If you are entrepreneurial then starting a business can be one of the best investments you will ever make. However, you have to have the confidence that you will succeed because many businesses close within the first year of operation.
The internet provides many good opportunities to start an online business with very low startup costs. All you need is a website and the knowledge of how to monetize your knowledge.
To be successful with an online business you need to learn about internet marketing as this will make or break the business. Usually, you need to follow a proven blueprint and have a mentor who will show you what steps you need to take to succeed.
9. Invest in yourself – You can choose to invest in some kind of education or training course which will make your skills more valuable.
Education is always a good investment but you need to have the time to invest as well as the money for the courses and training material, and you have to be sure that your skills are marketable after qualifying.
You will find more information on each way to invest through the navigation on the site, and you can comment or share your own experiences, good or bad so that others can be better informed.