It’s discovered that more than 40 percent of Americans aren’t investing their money.
While it’s clear that money doesn’t grow on trees, it can grow if you invest it in the right sectors. Even better, you may not need a lot of capital to start investing.
But, educating yourself on emerging opportunities and having a plan to achieve your goal will be vital in accumulating the wealth that you so much desire.
So, here are seven smart ways to invest:
1. Stock Market
The stock market refers to a public market where you can buy and sell stocks. A stock is a portioned ownership of a company, hence, a stock market is simply a platform where investors trade the ownership.
If the company whose stock you bought profits, you also profit. If it makes losses, you also do. Stocks become more valuable over time if its returns are higher than what was initially invested. This enables you to sell it for a higher price.
To become a stock market guru, stay up to date with the latest market news to make a better investment decision.
2. Mutual Funds
Mutual funds are money pooled from the public in order to buy other securities. The security determines the value of the mutual fund by its portfolio’s performance. Most mutual funds help shareholders gain diversification by holding a variety of securities at a fair price.
A mutual fund manager oversees the funds and charges a percentage fee once you invest in their mutual fund. This helps you earn income from dividends of the fund’s portfolio.
3. Retirement Accounts
There are several retirement accounts to consider, including:
This is a saving plan where you save for retirement by the sponsorship of an employee.
You can select a plan and then choose the amount of money to contribute to your 401k. This will help you choose your own investment plans.Also, this doubles your investment regardless of the market trend hence a smart investment plan.
Traditional Individual Retirement Arrangement (IRA)
This account gives a tax advantage to its clients. If you’re eligible for the tax deduction, traditional IRA contributions get deducted according to the year they’re made.
Although anyone can open a traditional IRA, not everyone is eligible to their deduction.
This is an account that is funded by your post-tax income. All withdrawals made after, that are of up to Roth IRA standards, done are tax-free.
Roth IRA appeal to those who want to reduce the amount of tax they will have to pay during retirement. If you expect your tax rate to increase by the time you’re retiring, you need to have a Roth IRA account.
Bonds are loans given to either a company or a government and are paid back with interest after the bond lifecycle. Bonds are considered safer than other investments because of their ROI.
Additionally, consider investing in worthy bonds. This can help you grow your wealth as they offer favorable fixed interest rates. While they mature over a period of several years, they can be cashed out at any time.
5. Peer-To-Peer Lending (P2P)
Here, loans are provided by individuals rather than banks.
In P2P, funds are disbursed in loans after an investor opens an account. A financial credibility profile is posted by an applicant for review. Depending on your financial history, you’ll be assigned a risk category which will determine your interest rates.
6. Crowd Funding
Crowdfunding is raising capital through the collective effort of member/individual investors. It offers the benefit of giving you access to thousands of accredited investors who can interact with you and share your fundraising campaign through the internet.
Those seeking funding set up profiles of their projects on a crowdfunding website. There are a variety of types of crowdfunding options including:
- Donation crowdfunding
- Reward crowdfunding
- Equity crowdfunding
- Debit crowdfunding
This helps those seeking funds to have access to more potential investors.
Types of Investments You Should Avoid
You should generally avoid investments that have high risks of losing your money and low return on profits. Such investments include:
There are many types of gambling including betting on sports, card games, lotteries, and more. In order to win a game, you’re required to risk your money with uncertain odds against you. Gambling can be addictive and cause serious financial problems.
Many people enjoy gambling as a recreational activity.
Shares that trade below $1 in western markets are referred to as penny stocks. This is because they trade at very low prices and have low market capitalization.
Penny Stocks are risky because they have smaller shareholders, lack liquidity, and they have a large bid-ask spread.
Get Rich Quick Schemes
These schemes try to sell the dream that you can get rich without working hard for it. In most case, you’ll have to register with some money or give away some vital information. Advertising of these schemes is usually done on the internet through pop-up ads.
Pyramid Schemes work by the recruiting of new members by top-level members. The new member must first pay an entrance fee and later on pay a certain percentage of his/her earnings to the members up the pyramid chain.
Pyramid schemes attract many people because they deliver high rates of profits over a short period of time.
Take Advantage of These Smart Ways to Invest
The seven smart ways to invest will help you become financially stable in the long run. Although investing has the possibility to lose money, its capability of growing money is higher.
Some of the advantages of investing include beating inflation by increasing the value of your money over time as well as having a solid retirement plan.
Check our blog for more informative financial posts.