The idea of investing on its own says a lot about someone’s forward thinking or strategically shaping a better future.
It is supposedly one of the most important things that people of all ages, races, social status have to do. Investing is by far one of the most important and recommended life things that people need to do for their twilight days or their dependence inheritance. This is at least one of the most globally known facts however people still fail exercise it.
One very important issue to address about investing from the onset is the fact that most people confuse the importance of saving or investing with the level of affordability. Of course how much one has does play a role but the big mistake that many people make is that they constantly associate essence of “investing money with being in position of huge amounts of money”. There are many best ways of investing money which are suitable for the rich and average earners. In many cases our stereotypical limited information would only make us to think of;
- Affordability – I don’t have enough
- Timing – it’s still too early to invest money
- Lack of confidence – is this going to work, what if it doesn’t and lose all my money.
All imaginable reasons for not investing can be justifiable but the main reasons for investing money are far important and beneficiary more than anything else. As much as it is advisable for people to invest, it is also equally important that prospective investors should be equipped with the right information in order for them to be able to take the first step. The information will save prospective investors from falling on the same trap the ones before them have made.
Explore ways of investing money
Here are the basics investment options;
Savings Accounts
Majority of investment company’s offer more than a once size fits all savings account i.e. passbook savings and statement savings.
A passbook savings account, is a record book in which your deposits and withdrawals are entered to keep track of transactions on your account; this book of recorded transactions must be presented when you make deposits or withdrawals. With a statement savings account, the institution regularly mails you a statement showing withdrawals and deposits for the account. Savings accounts are protected by federal deposit insurance. Generally, the government protects the money you have on deposit limited to an amount. Account features and fees may vary from institution to institution the next in shopping for an account, it’s important to look closely and compare the various features.
Here are some of the most common features to compare:
Interest Rates
Can the institution change the rate after you have opened the account? Does the institution pay different interest levels depending on the amount of your account balance, and what way is interest calculated?
Compounding Interest
How often is interest compounded? Is it daily or monthly?
Fees
Will you pay flat monthly fees? Will you pay fees if the balance in your account is below a specified amount? Are there charges for each deposit and withdrawal you make? Can you use ATMs with your account, and do they charge for this service? Are fees reduced if you have other accounts with the same institution? Are fees reduced if you agree to directly deposit your pay check or government payments?
Low Risk, Low Return
You have the option to lend a bank your money for a specific time period (up to five years usually).
In return, you will receive a set amount of annual interest on that loan. When the contract reaches its maturity date, you get all your money back. The interest earned n this is key, that is where your investment has paid off. This depends on a number of factors – which bank you choose to use, the prevailing interest rate environment, how much money you have invested and the time period you choose to lock it up for. Your local bank most certainly sells CDs, but always check if the rates are competitive.
When buying a CD, there are two things you need to keep in mind: annual percentage yield (APY) and annual percentage rate (APR). The yield is the interest amount in total you will earn over one year. It’s usually expressed as a percentage of what you invest and takes into account the way the specific bank you have chosen compounds interest. The rate is the interest rate you will earn for that year.
Stock Investments
Stock investments are a lot simpler that what everyone makes them out to be.
The complicated interpretations of the stock market on television and what we see and hear about on the news make it sound a little overwhelming. However, we have actually gone further to discover what it actually entails? Should you a share of Microsoft and you acquire a tiny portion of the software giant, tying your fate to that of Bill Gates, for better or worse? This is actually ownership in the most literal sense: You will get a piece of every desk, chair, contract and trademark in the place. Even better, you own a slice of every dime of profit that comes through the door. The more shares you buy, the bigger your piece of silver becomes.
What makes stock valuable?
The stock market itself is basically a daily referendum on the value of the companies that trade there. You have seen in movies, the way the guys scream at each other? Buy this buy that sell it! Their job is to take in the day’s news and simplify it down to one single question: Will it help the companies I own make money long term? If Microsoft had to lose a court battle to the Justice Department, you would see its shares drop. But if strong economic numbers come out promising better PC sales, traders will buy with a vigour and extreme haste.
Earnings or profits are the ultimate measure of value as far as the stock market is concerned. Wall Street is obsessed with the very thought of the words. Companies report their profits four times a year and investors crunch down on these numbers – expressed as earnings per share – trying to gauge a company’s present health and potential future.
Fast Earnings & Stable Earnings growth
In today’s market, we thrive on rewards both fast earnings growth and stable earnings growth. Stock traders will have to pay up for a money-losing company that promises to earn a lot in the future (witness 1998’s explosion in Internet stocks).
The market does not easily tolerate declining earnings or unexplained losses. Companies that surprise Wall Street with bad quarterly reports and results almost always get punished.
Mutual Fund Investments
Once you’ve made the decision to invest in the stock market, mutual funds are an easy way to own the stocks without the worry of choosing individual stocks.
As an added bonus, you can find a lot of information on the Internet to help you learn about, study, select, and purchase these stocks. But what is a mutual fund? It’s not as complicated as it sounds. A definition of a mutual fund is a single portfolio of stocks, bonds, and/or cash managed by an investment company on behalf of many investors. The fund is managed by the investment company who sells the shares with the outcomes of funding individual investors. Investing in a mutual fund, allows you to become a part owner of a large investment portfolio, along with the other shareholders of the fund.
When you purchase the shares, the fund manager invests your particular funds, along with the money contributed by the other shareholders.
Money Market
Money market funds are mutual funds. However, they don’t invest in stocks – they invest in U.S.
Treasury bills (notes and bonds with less than 13 months until maturity), top-rated commercial paper, bank notes, and other high-quality, short-term debt instruments. (They shouldn’t to be confused with money market accounts, or money market deposit accounts, which are FDIC-insured but pay much lower rates on average). Money market funds attempt to maintain a stable dollar per share NAV (net asset value), so their risk exposure is non-existent when compared with stock and bond funds. Money market funds are not insured or guaranteed by the government (or anyone else), but the Securities and Exchange Commission heavily regulates them; they have a number of restrictions on the quality, maturity and diversity of the securities they may invest in.
Bonds
Straight speaking, a bond is a loan and you are the lender.
So, who is the borrower?
Usually, it’s either the government, state, local municipality or a big company.
These entities need money to operate – to fund the deficit, for instance, or to build roads and finance factories – in turn, they borrow capital from the public by issuing bonds. When bonds are issued, the price you pay is known as its “face value”.
Once you buy it, the issuer promises to pay you back on a specific date – the “maturity date” – at a predetermined rate of interest – the “coupon”.
Savings Bonds
Millions of people around the world have invested in savings bonds to reach their savings goals.
Endless possibilities & quite popular
Savings bonds are known by their series names. Everyone has the opportunity to make use of these bonds. Savings bonds can be bought at almost any bank at start at a minimal cost.
Liquid investments are rather simple to obtain and easy to manage with no penalties if you cash in your savings bond within the first 6 months. The interest of savings bonds are guaranteed by the full faith and credit of the country or government. Should you lose a savings bond, it can be replaced.
Interest on savings bonds is exempt from state and local income taxes. Income taxes are postponed until you cash in your bond, or until it stops earning interest (30 years down the road).
Let’s keep context of the 2008 global market recession in mind. (prior and post global economic collapse). The global market recession caused a huge overall economic investments damage. The confidence of sceptical and careful individuals and company traders / investors across the board took a huge knock. That resulted to overwhelmingly profit loss for many economic investment markets and investors pulling out on the markets. Even the known reputable investments sectors like Stocks exchange, Retail Bonds Unit Trust, Property Bonds, shares and much more viable perception didn’t lure investors as they did before the global market crisis.
Half a decade later the economical investment sectors are not as volatile and extremely risky anymore. They reflect relative stable investing grounds again. So concept of investing money has become viable again for both individuals and business coporates.
Common Investments
The most common known best way of investing money is through commercial registered financial institutions like Barclays Bank, Standard Bank, Bidvest Bank etc. All these financial institutions offer different investment accounts packages and polices. Banks like Standard bank partner up with Liberty Life and provide great ways of investing money. Other financial institutions as well have their own “money investment” policies.
Unit trusts & government bonds
Unit trusts and government bonds are by far one of the most viable platforms for short term investors. They are also relatively safe and cheaper but their returns or interests are low. Unit Trusts and government bonds also do offer a slight comfort peace of mind because they have higher chances of acquiring and maintaining future and forward contracts too.
Commodity Investments
Investments on commodities are another best way of investing money. Even there, investors still need to have a prior detailed information on how to take calculated risks, choosing the right investing commodity packages, the risks, benefits and return in investment etc. A typical example is if one wants to invest on
Retails Bonds
It is a known fact by investors throughout the world that Retails Bonds was one of the heavily affected investment sectors, in fact during the recession period most investors, more especially in Euro zone countries, opted not to invest their money in Retail Bonds sector anymore. Retrenchments, inflation were some of the reasons for specific industries to have had experienced such drastic though times. Right now Retail Bonds have somehow recovered and its general global market performance investment field stands out as one of best ways of investing money.
Retail Bonds is one of many economic investment sectors who continue to boast investors’ confidence. The Retail Bonds sector is conducive enough for individual investors to plough their money.
Exchange Traded Funds
Exchange Traded Funds is one of many optional viable ways of saving money that most people seem to have ignore. This type of investment is similar to Unit Trusts. Both these types of investments are relatively easy to access and they primarily focus on financial markets. Exchange Traded Funds are are mostly equities-based. They are are less costly than active funds. Exchange Traded Funds economical investment platform have offers a luxury for investors to hold shares in the index in the same proportions and these have a similar risk profile to equity unit trusts.
One of the cheapest way of saving money is Subscription Shares. These type of saving or investing is often offered by relatively small financial institutions. These institutions offers a unique highly competitive savings scheme. This saving normally operate on a relatively small amount month subscriptions. Interest is compounded on monthly bases but the dividends are capitalised annually. Redemption notice of three months can be given at any stage after the first 15 months. This less risky investment scheme normally offers interest of around 6.25 percent.
Property investments
Real or Property Estate investment trust is one of the viable less hectic ways of investing money. This type of investment works similarly to a mutual fund but the only major difference is a group that investors that focus mainly in properties. This type of investment is liquid and allows investors to buy and sell shares of the REIT. These trusts receive tax benefits in exchange for paying most of their income to the shareholders and pay out regular dividends.
Agricultural investments
Agricultural commodities which are high risk but have higher return investments. He or she still needs clearer precise information about that particular Agriculture investment commodity.
Any prospective ambitious informed investor can also venture into investing money through various companies like Allan Gray, etc. There are many other reputable economic and financial sound companies throughout the world that investors can plough their monies in.
Investing in Shares
Investing in Shares one of the best way of investing money. Although they carry risk, but they also offer the highest returns. A relatively less risky way of managing shares (which also known as equities) is to join investors an collective and buy a portion of ownership is mostly like viable company. In most cases Shares are bought and sold on the stock exchange. If the company grows and becomes more valuable, the share is worth more, so your investment is worth more too. Some Shares pay dividends at the end of each financial year. Shares that pay regular dividends are good for getting an income or the dividends can be reinvested to grow your capital. Dividend income is taxed at a different rate from savings interest. One of the most important things that investors need to know is the period of investment. If he or she is looking for longer investment option maybe invest in stocks exchange or shares.
Most important thing to mention as I conclude these detailed report on the best ways of investing money is that, all investors need to know that this profound phrase “anyone who fails to plan is planning to fail” is very relevant to investing. As much as it is important to highlight all these above mentioned best ways of investing money, it is equally important to also not to be oblivious or present a one sided state of affairs about investing.
Of course we also need to admit that investing is one of those things that no one can or should claim it is always 100% guarantee to work out anywhere and everyone. Unfortunately in other emerging economy markets, the idea of investing on big scale investment sectors like Stocks Exchange markets does even exist (Congo is the typical example of this). On the other hand other economies the different ways of investing have failed a lot of investors. (Spain and few Euro Zone countries are some of the most recent typical example where the economy market collapse negatively affected or failed many investors.) These countries followed what many would consider as traditional tried and tested investment strategies but somehow investors from all the affected economies fail completely to produce the excepted or desired outcome.
Many unforeseen things beyond people’s control do mess up with the investment plans. Unfortunately when things like natural disasters that happen, they immediately destroy the economical money market. A typical example of those situations would be what happened in Haiti few years ago. Natural disasters like earthquakes bring the countries key strategic economical investment sector down.
Follow the global economy
Another unfortunate sometimes unavoidable thing that has proof to be a major problem that can easily destroy individual, businesses and countries investments is political turmoil within different countries. Libya and Egypt were once two of the major investment reliable countries in Africa but in a split of about 3 months both countries major investment were utterly destroyed through a civil war that emanated from a political turmoil.
Prospective investors must look at all the viable economic market investment packages available. These economical investment markets all have reasonable good benefits but they also need to remember that in investment market One good is accompanied by one bad and one bad is underlined by one good. So every investment package will come with its own unique risks.
Those are some of the things investors can’t control. There are however basic mistakes that most investors or ordinary people seem to continue making is making unrealistic saving or investing wish list, which are impossible to gain. Even though this is good initiative but it is always important for people to consult financial advisors. Contrary to the popular belief, financial advisors are not there to make quick money out of us but are there to help people make informed decision about saving or investing with the potential of great rewards.
Stay focused, stay disciplined
Financial discipline or drafting and sticking to the budget is one of the key essential financial tools that most people fail to use. In many occasions, these mistakes produce the opposite intended results. Frequently, financial ill-discipline or lack of budgeting see investors finding themselves in debt instead of the investment returns they expected.
Careful spending is one of the major challenges for investors. Often people tend to spend money on things they want (which is not wrong) but considering their situations or budget constraints they actually don’t need those things and this goes back to prioritizing, people need to always ask themselves “do I want this or do I need” and once this question is answered that person is on the way to making good financial or investment decisions. The quicker the investors deal with this challenge the better things will be for them.
This might sound like an old overly used overly rhetoric but people still don’t get it right. Avoid debt. Save money. Avoid debt. Save money. Before one make that decision he/she needs to consider few very serious factors like, how long they want to invest, how much can they afford to invest, what are the available investment options for them, how liquid do they want their investments to be?
Prospective investors must know that simplest / best or fastest way of investing money is to invest money on short term basis. Short term in this case refers to two to five years.
With all this said investing either for individuals or for companies remains a good wealth accumulation forward thinking or contingency backup. Retail Bonds, Stocks Exchange, Unit Trust, Real or Property Estate Bonds, Exchange Traded Funds, Shares, Subscription Shares remain as the best ways of investing money. Now you know importance of investing, minor mistakes investors make, viable options of investing for both individuals and businesses. The best advice ever is that you look at your current financial standanding and carefully choose the investment package that will suit your needs.