Top 7 Types Of Investments To Make Money

Types Of Investments To Make Money
If you are reading this article, chances are investments and making money is already on your mind. While it is true that sound investment can be a way to secure a better tomorrow, wise investors know a thing or two about the investment that other people don’t.

Wise investors already know they should not be putting all their eggs in one basket.

However, that does not stop them from putting their eggs in multiple baskets—the same way you should.

If and when done responsibly, investing is the best way to make money. While the term ‘investing’ itself may conjure up images of a wealthy businessman visiting a stock exchange market, investment is not solely confined to wealthy people. These investments are accessible to everyone and anyone, regardless of age, income, career, or financial status.

However, there are still some factors that influence the way individuals make investments. For example, a person who is close to retirement would have a different investment plan than an individual who is just starting his career.

To be able to secure a risk-free future, one should know in which areas to invest. Here are 7 types of investments to make money.

The Types Of Investments To Make Money

Let us take a look at the best types of investments that you can make for the future.

1. High-yielding Cash Management Accounts

A traditional checking or savings account generally offers less money than an online savings or cash management account. These cash management accounts are a combination of savings account and checking account. Like a savings account, they offer interest rates but on the other hand, they come with debit or credit cards and are offered by brokerage firms.

Savings accounts are suitable for short-term savings or money that you need to access only on some special events—such as for vacations. Contrary to a savings account whose transactions are limited to six per month, cash management accounts are much more flexible—and may offer higher interest rates too. Such types of high-yielding cash management accounts are best suited for risk-averse investors or those who want money in the short term.

One risk factor to consider in these high-yielding savings accounts is the loss of purchasing power over time owing to inflation. Nevertheless, you can still invest in these cash management accounts via an investment company or a reliable brokerage firm.

2. Certificates Of Deposit (CDs)

An investment type offered by banks, Certificates of Deposit are federally-insured savings account that offers a fixed return over a period of time. In short, when you purchase a CD, you are really agreeing to loan the bank an amount of money for a defined period of time.

If you have a CD, the financial institution associated with it pays you interest at regular intervals. Once this mature, you get your original money or principal back—along with any accrued interest, of course.

A CD is best for the money that you will need at a fixed date for the future. They are a good option if you have a time frame in your mind for an upcoming event; say a wedding or a down payment for a home loan. Common term lengths are usually one, three, and five years. However, if you need the money earlier than these terms, you might have to pay a fee for that.

It is true that with lower risk comes lower reward. This is true with a Certificate of Deposit, as they are extremely low-risk investments. Most banks offer CDs at a return of less than 3% per annum, which is not even close enough to keep up with rising inflation. You can search for the best rates for a CD online.

3. Mutual Funds

A mutual fund is a pool of cash that investors collect to buy stocks, bonds, or other assets. This type of investment spreads the investors’ money over multiple investments—in order to hedge or ‘avoid’ risk against any single investment losses.

Mutual funds are essentially made up of stocks and bonds, but they carry less risk. This is because your money is diversified across multiple investments. If you are seeking to save for retirement, mutual funds are a convenient way to get the stock market’s returns without going through the hassle of managing a portfolio of individual stocks. Some companies, such as biotech and technology-related companies offer high dividends, so investing in these mutual funds might be a good idea if you need a return in the long term.

The risk with the mutual fund is dependent on the investments within that fund. For instance, the value of the fund increases as the value of the investment increases, and it could then be sold for profit. However, even if you fail to make positive returns, you will still be required to pay your manager his fees. In addition, mutual funds demand an annual expense ratio before you even get on board to invest. This means that most mutual funds would require a minimum initial investment of around $500 to more than that. Even though some providers might be willing to waive that fee, you will still be required to pay it. Mutual funds are available through companies that sell them or through brokerage firms.

4. Index Funds

Like mutual funds, index funds spread your money across multiple stocks and bonds. The only difference between the two lies in their management—while mutual funds are overseen and monitored actively by a manager, an index fund is passively managed by a manager.

As these index funds are passively managed, naturally they involve fewer fees. This means you have an opportunity to get slightly higher returns than a mutual fund. Index funds are an ideal investment available for a long-term savings goal. Consequently, these index funds are less volatile than actively managed funds which are trying to beat the market.

When you invest in an index fund, you are actually getting your money in the long-term future. If you are confident enough that that economy will rise in the future, you are going to make good returns in the future. While this return isn’t as high as the returns offered through individual companies, it is nevertheless, a respectable return that is higher than the return offered by a savings account.

However, if the market goes into recession, it could be down for a considerable amount of time. If you have invested in an index fund, this would mean that your portfolio will also be down; hence it will offer lower returns.

Investing in an index fund is ideal if you want to ‘put your money in and forget about it, or if you don’t want to go through the trouble of investing in individual stocks. Nevertheless, an index fund will offer you greater returns than a mutual fund.

5. Dividend Stock Funds

Dividends are actually regular cash payments that companies pay to their shareholders and are associated with stable and profitable companies. Although the share prices of some stocks may not rise as high or quickly as some growth-stage companies, they can be attractive to investors due to the stability they offer.

Dividends stocks are best for any investor seeking to get a respectable return in the future. Young investors may invest in ‘dividend growers’ or those companies which have a record of consecutively increasing their dividends. Although these companies may not be offering high dividends yet, they could in the future—if their dividends growth is stable enough.

On the other hand, older investors would do well to invest in those investments which offer consistent dividends. Although reinvesting in these dividends might not be their goal, taking these dividends as cash could be a good option. Like other investments, the easiest way to buy dividend stocks is through an online broker.

6. Cryptocurrency

These are surely the newest and latest types of investments to make it to the list. They are unregulated currencies that are bought and sold on cryptocurrency websites. Cryptocurrency such as Bitcoin became popular in the last decade after the recession hit. As a result, they have become a new trend over the past years, as dollars have flown into assets.

Bitcoin is the most popular type of cryptocurrency available these days and its price fluctuates a lot. For instance, its price was $10,000 a coin at the start of 2020 but has now soared to $30,000 at the start of 2021. This is how investing in a cryptocurrency is so valuable. Plus, they are easy to buy online and investors hope that the value of these cryptocurrencies will go up in the future.

However, these cryptocurrencies are an extremely risky investment due to unforeseen risks—the risk of government intervention and the possibility that cryptocurrency would never be accepted worldwide as a mode of payment. You can invest in Bitcoin the same way you invest in any other currency. This means that just like you exchange US Dollars for other currency such as the Japanese Yen, you can also exchange your dollar for cryptocurrency.

7. Real-Estate Property

Investing in property includes investment in raw land, housing, and other rental properties. While traditional real-estate investment involves buying a property and selling it in the future, there are more types of real estate investments that you can make. Take, for example, real-estate investment trusts (or REITs) which are companies owning real-estate properties like malls and hotels. These companies offer regular payments so you would not have to wait for that long to get your money. In addition, this type of investment has its appeal owing to its tangible nature.

However, investment in real estate property comes with many risks. Firstly, you might not get the returns you are expecting. This typically happens when the value of the property goes down. Secondly, the interest rates generally tend to increase, so unless you have a fixed mortgage, you might face a barrage of endless payments. Lastly, these come with a tax even in the absence of a return or a profit.

Real-estate property is best for investors who are less risk-averse and are willing to make a high investment in the hope of a high return. Nevertheless, real-estate investment is highly illiquid, which means that you should not invest in it if you need access to the money quickly.

The Last Word

Investments are a sure way to make sure your money is saved for future use. With the rising volatile situation of the economy, investing wisely is an option one should never overlook or ignore. Not investing in anything can, and will, lead to losses that one might not expect. This is the reason why you should always ‘save up for the rainy days’, as not doing so can sway or even sink your boat.

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AUTHOR_NAMEAbout the Author:
Melanie is a creative writer with a special interest in Culture, Tourism, Business and Languages. Along with being associated with the Tourism industry for the past 7 years, she is working as a creative writer for CCJK, a known translation services provider.
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