With an uncertain economy, many people are wondering just where to invest their money so that it will not only be safe, but will grow. There are several alternatives, and by researching the pros and cons of each one, you will be making an informed decision. This is much better than simply handing your money over to someone to make the decisions for you.
Pay Off Debt
The first thing you should do before investing money is to pay off high interest debt. This is the most effective way to free up your disposable income: credit cards, vehicle payments, and possibly student loans, take up much of your potential savings ability. Once you have quit giving the companies money for loaning it to you, you have exponentially increased your saving power. The payment you are giving the credit card company not only has the power to grow, it doesn’t come with a monthly charge. Getting back that 14 to 19% interest charge is a pretty good return to yourself.
Money Market / High Interest Savings Accounts
This is a low risk savings investment. Savings accounts offer widely different interest rates. It is well worth your time to investigate different rates offered by other banks. With a higher rate of return, you can easily increase your income on sedentary monies.
Money market accounts invest your money in mutual funds while it is still usable for the owner. While the owner is often given a checkbook upon opening a money market, there is generally a limit on the amount of checks or withdrawals allowed within a certain amount of time.
This is a good option for people who want easy access to money while still seeing a return on the investment. Investing money in a savings or money market account is best for those who are creating an emergency fund or saving for a specific purpose.
Stocks / Mutual Funds
With the volatile natural of the stock market, it is easy to see the risk associated with stock recently. However, over time the stock market has proven to give a good yield over time. When deciding to invest in the stock market, be fully aware of the risk of dropping prices, and invest over a broad range of stocks. By diversifying your funds, you decrease your risk. Also, you can invest a small amount of a particular fund/stock every month to average to cost price and to reduce market risk. This popular investing method is called dollar cost averaging.
Real Estate
Right now, the real estate market is struggling. With dropping prices, it is the premium time to buy if you want to be a homeowner or to investor. With so many foreclosures, rental properties are going to be in more demand. If you are considering owning several properties as a landlord, keep in mind the cost associated with non-paying tenants and repairs you may be responsible for. With several properties, it is easier to offset costs with different sources of income. Single property owners have a harder time unless the income generated is enough to cover the repayments.
House “flipping” can be considered if you have the capital to make the necessary improvements. By buying a distressed property, one can easily sell it quickly for a good return, therefore the term flipping. In today’s real estate market, remember that it is a good time to buy, but a tricky time to sell. Make sure you are buying a wise property in an area of high demand.
These are not the only investments you can make. Also consider tax deferred IRA’s, or investing in commodities such as gold or oil. Research all of your options for pros and cons so that you make a wise choice for the long term. With a little planning and diversification, you can keep your investments working for you for the long term.
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