Many people think that investing is only for those they perceive to be wealthy or older. This is far from the truth, as anyone can invest as most types of investments can be accessed by anyone regardless of their career, income, or age. When done correctly, investing is an excellent way to grow money. You can learn how to become an accredited investor online to help you make the right decision. The following are five of the most common investments you can make to grow your wealth.
Purchasing stocks in a company makes you part owner of the company and offers you some level of control on the affairs of the company. This is done when you are invited to shareholders’ meetings to vote on major decisions. Your contribution depends on the number of shares you own. You make money by earning dividends at the end of the company’s financial year. Dividends are a part of the company’s profits that are allocated to shareholders. However, some stocks do not offer dividends. In this case, you will make a profit if you sell the stock after it has increased in value.
These are loans that you give to a company or government. Like any other loan, a bond accumulates interest over time. Bonds have a set maturity date when the loan is due where you are paid your original investment. The interest earned is paid out sporadically until maturity where the rate of payment is dependent on the bond terms. The most common issuer of bonds is the government to raise funds to run large-scale projects. Government bonds are stable and guaranteed which makes them one of the safest ways to invest your money.
You should be aware that money invested in bonds is not accessible until it matures; however, you can sell the bond before the maturity date if you urgently need funds. But, if you sell the bond before its maturity, there might be some extra charges involved.
3. Mutual Funds
This is a collection of bonds and stocks under the care of an investment expert. Mutual funds are diversified as they include various investments; this minimizes the risk if any particular bond or stock fails. Mutual funds pay off in various ways—interest payments on bonds and stocks or earn dividends. If the general value of the fund appreciates, you are free to sell the stake at a profit. Just as you do with stocks, you can sell your mutual fund shares anytime you need liquid cash.
4. Savings Account
Cash management accounts and online savings accounts offer higher returns than conventional checking or bank savings accounts. The accounts are ideal for short-term savings or putting away money that you only need to access occasionally, such as a vacation or emergency fund. Online banks offer higher returns for savings accounts due to their low overhead costs.
5. Certificate of Deposits
A certificate of deposit is a savings account that is federally insured that provides a fixed interest rate for a specific period. This is a good way to invest money that you do not currently need but may need in the future, such as for a wedding or to buy a house. The common term periods are one, three, and five years. Therefore, if you want to grow your wealth for a particular purpose within a specified time frame, a certificate of deposits is a good option.
As it happens with other investments, if you need access to your money before the specified time, you will be charged for it. To avoid this fee, buy a certificate of deposit with money that you do not currently need. Certificates of deposits are sold depending on term length and credit unions and online banks offer the best interest rates.
It is advisable to always be informed about the performance of your investment. For example, if you invest in stocks, follow-up on their performance in the money market to know its progress. Your stock may be losing its value without your knowledge which will be a loss to you. If you notice that the stock is losing its value, you might be able to sell it on time and still make a profit.
You can also hire a financial advisor if you have made huge investments to help you keep track of your investments and advise you accordingly.
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