There are always new, popular ways to invest money – carbon credits, cryptocurrency, etc.
But nothing beats the tried and true methods of investing money.
If you take a conservative, safe approach to investment, consider sticking to the classics.
Here’s a list of traditional ways to invest money. These methods have been practiced for centuries.
Cash investments refer to short-term and low-risk investments. The benefit is that you receive money quickly and without risk. But the downside is that you make little money.
In our day, cash investments are usually FDIC-insured. They typically give return within 90-days.
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Here are 3 common cash investments:
1. Savings Account
Your bank offers to store your money in a savings account. While it sits there, it accrues interest. Different banks offer various interest rates. The goal, of course, is to select the highest interest rate possible. These interest rates are minimal. The average interest rate for a savings account is .09% according to the FDIC.
2. Certificates of Deposit (CDs)
A CD is like a ‘locked’ savings account. Your bank stores money in an account that gains interest. However, you are not allowed to remove the money until a set time.
CDs have a higher interest rate than saving accounts. But the obvious downside is that you must wait to reclaim your money.
You can retrieve your money from a CD, but there’s a penalty for it.
2. Money Market Account
With this account, your bank invests in short-term debt securities. In the U.S. they’re regulated by the SEC. Money market funds can only invest in the highest rated debts. And your money is held within a bank. For these reasons, money market funds are widely considered a safe investment.
Stocks (also called shares) are pieces of a company’s ownership. If you own 5% of company ABC’s stock, that means you own 5% of company ABC.
There are misconceptions about trading stocks. Some picture it as high-stakes gambling. While there are some risks in trading stocks, that’s not quite accurate.
There’s a safe and popular way to invest in stocks. It’s called an index fund.
An index fund buys stocks from many companies, usually the top companies. Even if a few companies do poorly, the collective nets profit.
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If you want to start an index fund, Vanguard is a trusted institution.
Bonds are IOUs. Essentially, you’re buying debt. Whoever is indebted to you must pay interest, and eventually the principal.
There’s a risk that the bond issuer will not be able to repay the debt. That’s why you must select bonds carefully.
There are many kinds of bonds, but the surest investment is to buy government bonds.
Governments are less likely to default than companies. Governments have higher obligations to pay off debts.
Additionally, governments are more financially stable than companies. Their money comes from taxation, rather than profit. And taxation is surer than profit.
The most popular bonds are treasury bonds, which are issued by the United States Department of the Treasury.
Investing in real estate amounts to purchasing properties. In turn, the owner can resell the properties at a higher price.
Or, the owner can hold the properties and lease them for profit. Typically, properties are leased to businesses or renters.
To invest in real estate, most individuals must take out a loan. This is particularly true when purchasing a bulk of properties.
Middle-aged Americans commonly own 1 or more properties. This is to supplement their career income.
When working full-time, passive income from properties is ideal. Later in life, these properties can be sold for retirement.
Some run a property business, wherein they manage many properties full-time.
Safe Methods are for Safe People
We all invest differently. Some prefer day trading, while others prefer buying properties.
There’s a lot of factors to consider when choosing how to invest your money. The options listed here may not be for you.
But these are certainly safe ways to invest money.
How do you plan on investing your money? Does one method look more appealing than another? Let us know your thoughts with a comment!