Everyone knows that it is a good idea to keep some money locked away for a rainy day or to help cover unexpected costs, but do you know the advantages and disadvantages of investing your money? If you are saving money for something in the short term, then a conventional bank account will do the trick. Your money will be secure, and you will be able to access it easily when you need to, but if you keep your savings in a savings account for a long period of time, then inflation could, in fact, eat away at the value. However, if you are looking to save money in the long term and don’t need access to the cash, then you would be much better off investing your money and making a profit. An investment to simple is when you buy something with the hope of it increasing in value over time. So, if you are thinking about making an investment or you’re not too sure where to invest money, then keep on reading to learn more.
Why Should I Invest My Money?
Saving your hard earning money simply just isn’t enough if you are looking to build your wealth. When you invest, you are basically making your money work harder to earn more money, which is known as compound growth. In the long-term, investing your money will allow it to grow over the rate of inflation, unlike just using a savings account to store your money. So, you are looking to save money in the long term for something like your retirement then it makes sense to invest your money instead of just storing it away until you need it.
When Should I Start Investing My Money?
If you are thinking about investing your money, then you should have started doing so already. In general, it’s good to start investing your money as soon as you are financially stable enough to do so. However, an important thing to consider before you start investing is to make sure that you have enough money to live by. The reason that you should start investing as soon as you can is because compound growth takes time, and time is the most powerful tool when it comes to investments. It also means that if a market has a sudden downturn, then your money will have time to recover its value.
The Types of Investments
There a few different types of investments that you can choose to make your money work for. And, there are a select four that the majority of people look into. They are known as an asset class of investments because they are grouped together and regulated by the same legislation. So, let’s now take a look at them.
Stocks and Shares
Stocks and shares refer to buying one or more stakes in a business with the expectation that the business will be profitable or more profitable in the future, which entitles you to a share in the profits too. To put it simply, if you own a share in a business, then you technically own a piece of the business.
Real Estate and Property
Real estate and property investments are where you purchase or contribute a chunk of money towards a purchase of a piece of property. This type of investment can include both residential and commercial properties. People choose to invest in real estate and property with the hope of making money from the future value of the property.
Bonds are a type of investment loan whereby investors hope to make a profit by being repaid with interest. Bonds are known as fixed interest securities because when you take out the loan, the interest rate is fixed. Basically, a business or the government entity is assigned to your debt amounting to amount your loan is, and they agree to pay you back in full plus the interest your investment has earned.
Cash investments are precisely what you think they are. They are investments that are put into a bank or another type of financial institution. The most common type of cash investments are a simple savings account. However, cash investment normally offer a lower return than the other types that we have discussed during this article. But, they are considered low risk, which makes them an attractive investment opportunity for many people. More experienced investors typically use cash investments as a temporary solution for storing their cash while they look for other investment products.