The Changing Face of Investing
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We all know that investing is one of the keys to establishing a healthy financial future. We’re told this practically from the moment we earn our first allowances or first paychecks from our first jobs. By now most people understand how trading stocks and mutual funds, work. In this post we’re going to talk about other types of investing that you can do to help the money you earn make money of its own.
If you’ve never invested before, the first type of investment you should build is your retirement account. Don’t make the mistake of assuming that other investments will keep you covered. There are several different ways to do this. You can start a 401k, an IRA, etc. The idea behind these investments is relatively simple: you put money into an account and hope that the account earns a good amount of interest. And, often, it will because retirement accounts yield better interest rates than regular savings accounts. The catch is that if the financial market dips, like it did in 2008, your accounts could be in trouble.
If you have the soul of a gambler, binary investing and trading might be a good way to get your feet wet in the world of investing–but only if you know how to gamble responsibly. Binary trading is, basically, trying to predict what a stock or commodity (or other type of traded investment) will do and when it will do it. For example, “will Company A’s stocks be worth $250 by noon on X date?” you then buy either the “yes” or “no” option.
If you’re right, you’ll earn back your investment plus some profit. If you’re wrong, you’ll lose your investment and potentially have to pay some extra money depending on the type of option you’re trading. This blog, 24Option.com, breaks down how different companies, commodities, etc. tend to perform and whether or not they are worth the risk of binary trading.
Real estate is considered an “ownership” investment (i.e. you buy something and hope that it will appreciate in value so that, when you sell it, you earn a profit). A lot of people lost their shirts when the housing market bottomed out a few years ago. Even so, if you are smart about it, investing in real estate can be a great way to invest, especially if you plan on keeping the property and renting it out (the rental market is doing very well, thanks to high demand). Unfortunately, investing in real estate requires a considerable to be paid up-front so this is not an investment option for the beginning of your portfolio.
Another type of real estate investment is called a REIT. This is where, instead of buying property outright, you pay into a company that makes money from its own real estate investments. It’s sort of like a mutual fund but for real estate instead of stocks and bonds.
TIPS stands for Treasury Inflation Protected Security. TIPS are sort of like savings bonds except that the value is based on the rate of inflation as well as the amount of interest earned over time as the bond matures. What’s great about TIPS is that you will always make back at least what you paid in. You do not have to worry about market deflation costing you money. For that reason, TIPS are a pretty safe investment. The problem, though, is that you are charged federal taxes on whatever your bond earns. Plus, inflation rates are variable and sometimes go into the negatives (called deflation). So it is possible that if the economy does very well, your TIPS won’t yield much of a profit.
As you can see there are a lot of different ways to invest your money. Start by investing in yourself and then branch out from there!
Photo courtesy of: edar
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