Aimlessly keeping money at home is not the right decision if you are thinking about your future. The best solution is to correctly distribute money between investment projects. In this case, the funds will work and bring dividends, not just lie and wait for depreciation by inflation. By the way, by September 2022, the average inflation in the world rose to 13%, and the median inflation to 9%. Such indicators once again make people think about where it is best to invest money and get additional income. What is the safest investment with highest return? We bring to your attention seven available investment options.
Saving or investing – which is more profitable?
The desire to make savings is commendable, but it is necessary to ensure that the money is not just in the safe but also works for its owner. It is recommended to create your own personal reserve fund or financial cushion, which would be enough for three to six months of normal life without work, and invest the rest of the money in various investment projects.
Financially successful people usually try to live by the following rules:
- a minimum of debts and loans (if possible, their complete absence)
- expenses never exceed earnings
- part of the earning is put into savings
- part of the earnings is invested.
You should not limit yourself to only making savings because money is gradually depreciating under the influence of inflation. Over the past year, for example, inflation in the Eurozone exceeded 10%. And this means that for every 100 euros you can buy 10% less goods than a year ago. But if these 100 euros were invested in any project, then in a year, they would probably turn into 110 euros or more. In addition, it is not only inflation that poses a risk to your savings. Other economic forces can devalue money even more. A reasonable balance between saving money and investing is the optimal formula for financial well-being.
This is perhaps the most common and popular way among individuals to invest their money. And companies also often open savings bank accounts to concentrate profits.
However, in this case, it is worth choosing the right bank for opening an account to protect your funds from possible shocks in the form of bank collapse and other unpleasant situations.
Why is it worth investing money in a savings account:
- Investor is not required to have any special knowledge.
- Often, you can open a suitable bank account remotely.
- It is possible to track the money growth dynamics in the bank’s volume change chart.
- Deposits of a certain amount are usually insured with the DIA.
- Long-term deposits help prevent the depreciation of the money invested.
However, the depositor should remember that they will have to choose between liquidity and the amount of deposit profit because the easier it is to withdraw money ahead of schedule, the lower the interest will be. Long-term deposits are considered the most profitable, but in this case, it is almost impossible to withdraw money ahead of schedule without losing interest.
This way of investing your money is riskier than deposits. An investor buys company’s shares and will now experience all of its ups and downs. Shares of stable and strong companies increase in value over the years, so you can make a good income by selling them a few years after purchase. Sometimes, due to rapid growth, you can get a good income in just a few months. Shares also provide an opportunity to earn on dividends, which are part of the profits paid by the company to its shareholders.
Why you should invest in shares:
- With proper management, the profitability of a diversified shares portfolio can reach 15% per annum only by increasing their value.
- In the long run, shares of large and successful companies almost always rise in price. When the issuer grows, so do its shares.
- Due to the popularity of this investment method, you can find many working strategies and valuable advice from experts in this industry on the Internet.
But it is worth remembering the high volatility of shares, which can sometimes lead to severe losses in savings in the short term. In addition, when buying shares, no insurance is provided, as in the case of deposits. It should also be noted that income from shares is usually taxed (depending on owners’ tax residency).
Investing in precious metals
Most investors see investing in precious metals as a way to simply save money. But with the right approach, this investment asset can also be used to make a profit from the money invested. Precious metals are practically not subject to volatility and retain their value in any exchange rate of the national currency or global economic shocks. Due to the high liquidity of these assets, they can be sold at any time.
Why invest in precious metals:
- Against the backdrop of fiat currencies’ devaluation, gold and silver always retain their liquidity.
- At any time, the owner can sell gold or silver at the purchase price or even at a profit. The spread between the purchase and sale prices is minimal and non-existent in the long run.
- Gold has been a proven asset for centuries. In the long term, the value of precious metals is constantly rising.
A feature of investing money in precious metals is the minimum profit in short periods. That is, for those who are set up for quick profits, this asset is not entirely suitable. Also, such investments do not imply dividends.
Explore the safest investment options to protect your money.
Buying real estate
This way of investing your money requires significant start-up capital. After all, it is necessary not just to buy any real estate but to choose an object that is profitable from an investment point of view. And this will require serious money. In the future, it will be possible to rent out an apartment/house/commercial space and earn income. In addition, real estate located in promising areas grows in price over time, allowing you to receive income from its sale later.
Why you should invest in real estate:
- In times of crisis, investing in real estate is a great way to park your savings.
- Unlike, for example, cars, which fall in price every year of operation, real estate grows in price, steadily overtaking inflation.
- A high entry threshold is solved by investing money in real estate through a REIT fund.
One of the disadvantages of this investment method is its low liquidity because conditionally selling an apartment in one day will not work. And this means that transforming an asset into real money will take some time. The procedure takes an average of at least a month and involves additional real estate agent costs.
Use our expert services for choosing suitable real estate. Specialists will help you find an object that will really become profitable and reliable even in times of crisis.
Unlike shares, bonds are less profitable but more reliable. A bond is a debt security that reflects the relationship between the issuer and the investor. If there is a need to raise additional funds, the company issues bonds. By purchasing a bond, the investor lends their money to the issuer, and the issuer undertakes to pay this debt at a particular time and with interest.
Why is it worth investing in bonds:
- Investors are not obliged to participate in managing the company whose bonds they have purchased.
- Interest payments are guaranteed. When issuing this security, the issuer regulates the amount and frequency of payments. In this regard, bonds are fundamentally different from shares. After all, the company is not obliged to pay dividends on shares – this decision is made at a meeting of shareholders.
- Bonds have an expiration date. Bonds typically have maturities ranging from one to five years.
- When the issuing enterprise is liquidated, the bondholder has a better chance of returning their money than the shareholder.
But bond yields are lower relative to shares, and there is no insurance against default. To minimize risks, buying bonds with a high credit rating is recommended.
Learn how to open a brokerage account to hold shares, bonds, exchange-traded funds (ETFs), and mutual funds.
Yes, such an investment is quite risky and not suitable for everyone. But with a successful investment, you can get quite a tangible profit, even in the short term. Every currency has periods of fall and rise. The principle of earning on cryptocurrencies is speculative: buy cheaper when the price falls and sell more expensive when it rises. Before purchasing a cryptocurrency, it is worth doing a fundamental and technical market analysis.
Why it is worth investing in cryptocurrency:
- One of the main advantages of such investments is the ability to get a quick income.
- The investor’s personal involvement in the processes is minimal since special platforms have been created for cryptocurrency transactions.
- Even a beginner can invest in cryptocurrencies.
- The entry threshold is low.
However, investing in cryptocurrency comes with certain risks, as you can lose access to digital money due to a hacker attack or your own carelessness. In addition, the cryptocurrency rate can fall sharply, threatening the investor with losses. The profitability of this investment type is not guaranteed, and in many countries, there is no clear legislative framework for cryptocurrencies.
Investment in luxury
This way of investing money should be considered as a way to improve the efficiency of the investment portfolio. That is, it is not recommended to bet only on luxury goods as the primary investment option. Luxury refers to alternative investment tools, and many investors add such assets to a portfolio to balance it.
Luxury goods are:
- paintings by famous artists
- rare alcohol
- collectible women’s bags
- retro cars
Of course, to profitably invest money, it is not enough to buy any painting or watch. This should be the purchase of a promising asset that is expected to increase in price.
Why you should invest in luxury goods:
- For a well-chosen asset, the price is not volatile and is unlikely to fall.
- Precious items, for example, allow a huge amount of money to be concentrated in one small asset, resulting in its high capital intensity.
- Due to changes in prices for precious metals and stones, there is an opportunity to earn on assets in the short term.
However, it is worth remembering that the main disadvantages of investing in luxury are low market liquidity, a long investment period, and a high entry threshold. Selling such an investment asset immediately will also not be possible because special expertise is needed. This option is recommended only for those who have really good experts who are ready to suggest promising lots.
Where not to invest your money
There are a number of areas and things in which it is not recommended to put money for investment purposes. Thus, it is entirely unjustified and even dangerous to invest in gambling, lotteries, sports or other betting, funds for developing promising drugs, etc. At best, a person can lose their money, and at worst, they will get into debt. It is dangerous to invest in dubious projects, where they promise super profits in the first month, as well as in all kinds of financial pyramids.
Purchasing serial jewelry, household appliances, and ordinary cars also should not be considered an investment.
But despite all the risks, it should be remembered that a competent investment of money is an opportunity to take care of tomorrow, create sources of passive income, and increase your capital. It is only necessary to carefully study the chosen investment area, understand technical issues, and not forget about risk diversification.
For any questions on investment issues, please contact our experts at firstname.lastname@example.org.