For those who have only recently accumulated enough excess money to consider investments, the range of options can be startlingly complex. For many people, at the very most it used to mean leaving one’s cash in a high-interest savings account for a few years.
But in terms of getting a bigger return, savings are arguably a very slow way to make money. Given the kind of low-interest rates set by the central banks of the world over recent years, savings are even less profitable than they were before the 2008 financial crisis. But once you’ve come round to the idea of investing your hard-earned money, where should you invest it?
Where to Invest?
Unless you have particular knowledge of stocks and shares, or have been given inside information on a particular stock, (which is what got Martha Stewart into jail) then it is unlikely you would have the knowledge to invest in shares without some form of advice. If you have the time to study a particular set of shares or a particular sector of the economy long enough, then you might be able to make some good share-buying decisions – but most people don’t have that time.
Get Professional Advice
This is why people turn to professionals. There are scores of investment funds (mutual funds, Exchange Traded Funds, etc)Â that specialize in different sectors of the economy or even generalized funds that seek to mimic broad indexes like the S&P 500. Each is managed by a professional or a team of professionals but you still have to be sure that it is the right fund for you. See: Investing in a Mutual Fund
And all these investment funds can be categorized as having varying degrees of risk attached to them. Generally speaking, the higher the risk, the higher the potential returns. See: What You Need To Know Before You Invest Money You might also consider
hiring a professional money manager to help you allocate your investments. They will often help you balance your Saving, Retirement, Investing, and Insurance goals. Often they are quite reasonably priced because they receive a portion of their income from commissions. Of course that does put their personal goals somewhat at odds with your goals in that they want to sell you something in order to earn a commission but if you are aware of that you can be more cautious. Other options are “fee only” financial planners who will cost more but you are sure they only have your best interests at heart.
Diversification
You should always limit your risk by not putting all your eggs in one basket. Each investment type has a purpose and by balancing them against one another you can keep your entire nest egg safer. Â See: Risk Management- The Key to Safe Trading
Investing in Gold
If you’re looking for a low risk investment, there are many to choose from, though a lot of people are deciding to invest in gold. It is currently considered a safe bet because it is not subject to mass printing of additional shares. And it has been considered money for thousands of years and has performed very well over recent years. It is seen by many as a wealth preserver, and tends to get backed even more when economic times are tough. There have been spectacular returns on gold recently, and experts believe that gold has a long way to go before it peaks – particularly given the fact that output limited while the government’s printing presses can run non-stop.
So in terms of a good investment, you have to decide at what risk level you wish to engage the market. Do you want short-term gains with high risk, or long-term gains with lower risk? The choice is yours.
Editor’s Note:
Many experts don’t consider physical gold to be an “investment” but rather a “store of wealth” because it doesn’t pay interest. Theoretically, if gold’s price only keeps up with inflation you won’t profit by holding it, you will just maintain your purchasing power. However, if gold’s price is temporarily or artificially held down like it was in the early 2000’s and in the 1970’s it will bounce up sharply once the artificial forces are removed. Thus the sharp upward correction we’ve seen in the last few years. Experts recommend not having more than 5-10% of your assets in gold.
See Also:
How the Dollar Affects Gold Prices
Risk Management- The Key to Safe Trading
How Does Gold Fare During Hyperinflation?
What Happens to Gold if We Enter a Recession or Depression?
Inflation Adjusted Gold vs Stocks vs Bonds