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A Guide to Investment Options

investment options

About 35% of Americans have less than $1,000 saved for their retirement, excluding the value of their home.

If you want your golden years to truly be golden, you’re going to need a lot more savings than that. To kickstart those savings, you might consider starting to invest.

Investing is one way to make additional income without having to do any physical work. But to maximize the chances of a return on your investment, you’ll need to understand your investment options.

Keep reading to learn what those are so you can choose what’s right for you and your financial goals.

Stocks

Buying stocks in a company mean you essentially own a small share of that company. Stocks are a very small portion of ownership in a company. They’re described based on the performance, type, and size of the company.

You don’t have to be a stockbroker to start investing in the stock market. All you need is a low-cost brokerage account and a few hundred dollars to invest. In fact, many beginners choose stocks based solely on the companies they like – but you can choose to do more research than that.

Bonds

When you invest in bonds, you’re essentially acting as a lender. You lend money to an organization or government. In exchange, you earn interest. The loan and interest payments are for a pre-determined amount of time.

In addition to the interest payments, you also get a principal payment. The principal payment is made at the end of the maturity period of the bond.

Bonds are a lower risk investment than stocks. With that said, lower risk investment options usually garner lower returns. But bonds are a great stable investment option that you’re guaranteed to make money from.

Funds

Funds range from closed-end funds to exchange-traded funds and mutual funds. In this investment arrangement, a group of investors pool their money. They then decide how to invest their pooled funds.

Of the most common types of funds, mutual funds are one of the more popular investment options. A mutual fund is an investment in a collection of stocks and bonds. You enter into this investment with a group of other investors and a third-party manages the money for you.

This investment arrangement means choosing a third-party you can trust. Make sure you look for an experienced investment firm. Mutual funds can have big fluctuations but with someone who knows what they’re doing, they can offer high returns.

Products From Banks

Perhaps some of the safest investment options out there are products from banks and credit unions. These include checking and saving accounts as well as other services that help you manage your money. They offer little in terms of returns, but they’re safe, predictable, and a good place to get started.

For example, a High-Interest Savings account isn’t just low-risk, it’s a no-risk investment option. All you have to do is deposit money into the account, keep it there, and you’ll earn interest.

There are typically minimal withdrawal fees associated with this type of account and there’s very little work to be done on your part. Look for a bank with online banking, good customer service, and ease of depositing to make this even more convenient.

Peer-to-Peer Lending

A relatively new way to invest your money, peer-to-peer lending is similar to bonds in that you become the lender along with a group of other investors who have pooled their money. However, in this arrangement, you’re lending money to individuals in small increments and the rate of return is significantly higher.

With peer-to-peer lending, you don’t have to make huge investments, either. The sums of money involved aren’t large and they’re split into small increments over a long period of time.

The benefits of peer-to-peer lending also include the fact that it’s really easy to get started. All you have to do is find a peer-to-peer lending platform online, sign up, and start investing with as little as $1,000. You’ll also see a rate of return as high as 5% to 7%.

Insurance

One alternative way to invest your money is to look into life insurance. Choose from term life, universal, and whole life policies, depending on your needs and how much you’re willing to spend on your monthly premiums. And remember that variable life insurance and variable universal life insurance are considered securities products, which are a form of investment on their own.

You might also consider looking into annuities with your insurance company. An annuity is a contract that provides periodic payments to you. These come in two forms, immediate annuity, and deferred annuity, depending on when you receive those payments.

Real Estate Investment Options

One way many people choose to invest their money is real estate. You can make money from an investment property that you rent out or sublet.

But not everyone has the patience to be a landlord or the funds to purchase a second property. In that case, you might consider investing in real estate through real estate notes.

A real estate note involves pooling your money with other real estate investors. Then, one person manages the properties. You earn a return on the dividends or interest from the money you loaned.

If being a landlord doesn’t sound like your cup of tea, this is an excellent way to get involved in the high-return investment world of real estate. Of course, you have to have a high degree of trust in the person managing the properties.

Ready To Start Investing?

Among the many investment options, the most common are stocks, bonds, and funds such as mutual funds. You may also be considering investing in low-risk bank products, new options like peer-to-peer lending, or even in real estate or insurance.

Regardless of where you choose to invest your money, you’re going to need some additional support and guidance. Contact us to find out how we can help.

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