Investing is the allocation of funds with the expectation of future returns or benefits.
Investment is necessary because it can serve as your alternate means of income, it can help you to retire early, it can be a safety net in times of financial crisis and it can get you out of debt as well. Certain kinds of investments enjoy tax exemptions as well.
Investments help you to achieve your financial goals well ahead of time, due to money’s power of compounding. When you invest, you are letting money work for you to generate more income, which is a really wise move. There are a few cardinal rules to follow when you engage in investing your funds.
- Choose an investment option only after you carefully weigh the benefits of the option against the risks.
- Keep Debt under control, because there is no point in having investments if your debt is going to be higher than your investments.
- Have an emergency fund to cover any unforeseen expenses or medical emergencies.
- You should be able to ride out the market’s ups and downs without having to access your invested funds or the returns that you have accumulated over time.
Investors generally want to put their money into the best investment options available, so that they can get maximum returns at minimum risk, in the shortest time possible. The reasons for investing differ from people to people. Some people invest for future financial security while some people invest to meet certain pre-determined investment goals.
While choosing to invest, one needs to be cognizant about how much of risk you are willing to tolerate, the length of time you are willing to hold on before liquidation, the financial goals you have set for yourself and liquidity parameters that you are subject to.
Listed below are the top 5 viable forms of investments that yield good returns:
- Real estate
Real estate is one of the fastest growing sectors and it holds great promise for the investor, be it private, housing, retail or commercial. The value of property appreciates over time and it becomes dearer with the passage of time. Real estate investment works as an asset, which is considered as one of the best investment plans with high returns over a long term period.
- Shares
Shares are also known as stocks or equities. When we talk about investment, it is shares that come to mind first.
By buying shares of a company, we are essentially buying a small part of the company. Some of the biggest and most profitable companies in the world are listed on the stock market and it is possible to buy their shares. These include companies like Apple and Facebook,
Shares are considered as a growth investment because it helps to increase the value of the original investment over time. The shareholders get paid dividends (portion of company’s profit) periodically, if the company is in profit.
- Bonds
A bond is a financial instrument that allows you to lend money to a company or the government. When you buy a bond, you’re giving the company or the government permission to borrow money from you and repay you with interest.
Bonds are considered to be less risky than stocks, but they may also provide lower returns. As with any loan, the primary risk is that the issuer will be unable to repay the loan and might default. The money that you lend will accrue interest and periodic payments will be made to the lender. Every bond has a stipulated time period. Once that period is over and the bond matures, you would receive the principal amount back.
- Commodity market
Commodities are tangible goods in which you can invest. They’re common in futures markets, where professionals like producers and commercial buyers try to protect their financial investment in commodities.
Before investing in commodities, retail investors should make sure they understand them completely. Part of the reason for this is that price of commodities are subject to market fluctuations. They can move sharply and abruptly in either direction due to unexpected events that are totally beyond our control. For example, weather fluctuations and the advent of the rainy season can dictate the prices of agricultural products; Geo-political factors can influence the price of oil etc…
- Bank Deposits
Bank Deposits, both long and short term ones are the most popular form of investments. This is because there is minimum risk associated with bank deposits. It is relatively easy to liquidate the investment and withdraw the cash.
Also, bank deposits offer fixed returns over the period of investment. The interest is payable on a monthly, yearly or quarterly basis. The ease of transaction makes this a favored means of investment for most people. Bank deposits offer financial security and it is a safe means of earning interest on deposits.
As the fixed deposit is not affected by market fluctuations, the returns are also guaranteed.
There exist many different options to choose from, when it comes to the various forms of investments. Some options are basic and are suitable even for beginners, while others necessitate more research and experience. Each type of investment has a different level of risk and reward attached to it, so no matter what your goal is, you’ll find a good option or two.
Prior to investing, the investor should do a detailed check to see if the investment will bring in the kind of returns that he is hoping to achieve.
When it comes to investing, having an expert on your side can be beneficial. It doesn’t have to be difficult to find a qualified financial advisor. Money Coach Hanaa Al Hinai can provide valuable guidance in your investment journey.
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