Different investments work better at certain times. And based on the skills we have.
And mixing up the investments can be a good idea for diversification purposes.
Sometimes we lack the knowledge of what options there are out there. And it can be a great idea to know about the other possibilities in the investing world.
So we can take advantage of more opportunities when they present themselves. Or know when we should stay in or out of something.
A stock is a part of ownership in a business. And you can almost buy stocks at any company.
You can be a part owner of Google if you can afford their stock.
Stocks are very volatile. On average, 50% difference between the lowest and highest price in one year.
There are a lot of opportunities in the long run.
Buying any stock and getting an insane amount of money is not realistic. Strategy and valuating companies are needed.
Recommended holding period of stocks is over five years.
You lend out money to a company or even a government. And you get paid interest.
Safer investment since paying out loans is a priority for a company. Paying investors that own the business comes in second.
But there are risks. The company is unable to pay back. But if you loan out to a government are much more likely to be able to pay it back.
Always make sure to check the risks. Even if they are AAA rated, it can still be risks involved.
Exchange-Traded Funds (ETFs)
ETF is a machine that buys every stock in an index. They are more diversified than buying one stock meaning there should be less risk.
It still has very high volatility like stocks. And different indexes are better than others.
S&P 500 is one of the most popular indexes. It consists of the 500 biggest US companies.
And Vanguard provides a cheap and easy way to invest in it.
The recommended holding period is also over five years.
Mutal funds are a company that does the investing for you. Think of this as paying someone to handle the investments for you. Most of them will not beat an S&P 500 index fund thought. At least not in the long run.
But some do lead to great returns. And some are more diversified.
Hidden index funds are a common practice in mutual funds mimicking the index. But, charging you way more than an index fund does.
Options are buying the right to buy a stock at a stated price. It is like insurance to the right to buy a stock.
So let's say a stock is selling for $100, you could buy it, but then you're stuck with it no matter what. Or you could be buying an option for $5 that gives you the right to buy it at $100
So if it goes to $150 you can buy it for $100. If it goes down to $70 you can skip to using the option, losing $5 instead of $30.
Do you have some do-it-yourself skills and are alright with putting money upfront. And dealing with tenant's real estate investing might be for you.
Many people live off this but don't believe if anybody telling you real estate always is a good investment. Always do the math and compare it to other investment methods.
Inflated prices are due to the ability to take out loans.
Almost everyone takes out loans to buy real estate. Meaning the market is as good as guaranteed inflated.
But buying real estate has its upsides, even if you don't have DIY skills.
If you are bad at investing and having a hard time saving money. Real estate might also be a good idea.
Since a mortgage forces you to keep saving, most people own a house for a long time. Two crucial aspects in the world of investing. Compounding and long-term.
Certificates of Deposit (CDs)
Certificates of Deposit are locking your money at a bank for a higher interest rate than you typically get.
You can withdraw how much money you want whenever you want from a regular bank account. With CDs, you can't until the lock period is up.
You want to see what bank has the highest rate and best terms. Since the standard card bank could provide can offer much lower interest.
You can invest in commodities like oil, milk, corn, wheat, gold, and lots more. There are also sub commodities, for example, different types of milk.
You could buy some corn and store it in your living room. Or you could buy a contract for differences (CFD)
Watch out since many use very high leverage for this. This means you can get more profit and lose more than you invested.
Cryptocurrencies are a currency for buying and selling goods. But right now used as a speculative investment. Way more than a currency.
Cryptos have very high volatility. And since cryptocurrencies only have speculative usage, they don't have any tangible value. Meaning it's hard to invest in cryptocurrencies.
You pay an insurance company, and they pay you a fixed amount until you die.
Annuities are usually considered safe but with lower returns. If there are some tax advantages, it could be worth it.
But they often make very high commissions, so this doesn't strike me as such a good investment if you are young.
But if you are old and rich, this can be a good investment.
Index funds are the easiest and should work best for a long time. But sometimes you don't have so long time to invest in something. Or want to spread the risks.
Bonds can be way safer and can give good and more stable returns. And it's recommended to have more bonds the older you are.
Choosing your stocks is where you can get the most money. But are also where many people do lose money. They can't beat the index and gamble since they have no strategy or a bad one.
Real estate can also be a good investment but you have to do more active work. After buying such as renovating and tending to tenets. And it does force you in most cases to apply basic investment strategies.
Such keep adding to the investment in the form of a mortgage. Most likely a long-term investment and often a lot of leverage.
Commodities seem to be hard for retail investors. And there is a lot of speculating so seems like this is best for big businesses and not you and me.
Nonetheless, you can invest this way and for example. Buying gold and holding is what many rich people and even banks do.
Cryptocurrencies seem to be a very interesting way of investing. And my best returns have always come from bitcoins. But it's a lot of speculating making this not the best way for the majority of the money you want to invest.
Since you want things that have some value today. And cryptocurrencies may dominate the currencies in the future it's hard to say what they will be.
Since for example, there comes out a much better cryptocurrency. And no one wants to use bitcoins to buy goods since the other crypto is better for practical reasons.
CDs could be a good option if you need the money in an x amount of time and could lock it for an almost guaranteed income. And since you may not want any risks because you need the money so soon.
Since most investments are a lot more volatile than lending money to banks.