Charles Ngo, a renowned entrepreneur, recently shared an anecdote from somebody he knows. This man was making $10,000 a day from ecommerce. Then his Facebook advertising account got banned and he was left with nothing. He hadn’t been investing, which left him in a very bad position.
As an entrepreneur, you can’t expect good times to last forever. You need to invest for the future. This means that you need to set money aside while times are good.
But investing isn’t enough. You need to make smart investments, just like you do when running your business. Otherwise, you can lose everything if the assets you purchase go south. This happens to people that invest in derivatives, penny stocks, time shares and other bad investments. Fortunately, there are lots of stable investments that are all but guaranteed to grow your net worth if you are properly diversified.
As 40% of Americans don’t have $400 to cover an emergency, it’s clear that the idea of investing money is daunting to most people.
If you’ve never considered investing, it’s probably because you don’t know where to start. With all of the different types of investments available, there’s one to suit just about any type of investor.
Here are five important types you should consider.
1. A Savings Account
When you want to start saving money as soon as possible, consider opening a savings account. You can have your account up and running in minutes and start saving immediately. While interest rates are fairly low, they have low risk and are a secure way to keep your money safe and watch it grow.
When money goes into a savings account, it’s actually being loaned to the bank for a low-interest rate for them to grow and invest with it. Interest rates are low because there isn’t a lot of risk involved but it’s much better than keeping cash in a box.
As the buying power of a dollar drops by 3% every year, after just a few years, the buying power of $1,000 falls below $900. If you don’t have your money growing by at least 3% from year to year, you’re losing cash value day by day.
If you’re risk averse but want to make a smart and dependable decision, go with a standard savings account.
2. Term Deposits
Similar to what a savings account can do, term deposits can grow interest over time and give you a return. However, if you’re willing to fully lend the money to a bank for a fixed period of time, you’ll be able to see a higher interest return at the end.
If you need interest, have a lot of money to put in a savings account, and don’t plan on touching it for a while, term deposits are a great solution to growing your wealth fast.
Most instances of using a savings account will give only a low return on your deposits. Even the best accounts give you less than $3 over the course of a year for every $100 you put in. For the average person who has saved less than $400, this isn’t a very useful account.
However, term deposits can be a great fixed interest investment for people who come into a sudden windfall and who are looking to grow their wealth. Growth takes time, but a few smart investments, like term deposits, can add a boost to what might otherwise be a very slow rate of growth.
If you’re confident in your government, how the economy looks, and where the country is headed, you might want to invest your money in them. A bond is like a certificate of payment you can cash in on from the government. If you follow the news, you know that the country always needs money to run, and a bond is what can give them the capital to keep going.
Bonds don’t always have to be issued by the government. Bonds can be given by a council, local government, or any organization that follows SEC rules. Bonds are attractive, but not actively used by some of the wealthiest people in the world today.
Since people sit on bonds for years or even decades, they can grow large as their owners forget about them and allow them to increase.
Bonds can be sold early, unlike a term deposit that is linked to a specific time period. However, if you sell a bond early, you could end up losing money as they can go up and down. Bonds are fixed interest investments that are theoretically headed in one direction but can vary pretty broadly.
Shares are great for people who love to learn about how a company works and grows. A share isn’t merely an object you buy. When you buy a share, you now own a part of the company that you’ve bought a share from.
If a company that you’re buying a share from makes money, you get to own a part of that profit. That is called a dividend and usually paid out quarterly or annually.
When people talk about shareholders, they’re literally talking about the people who own shares in a company. Shareholders can make important decisions or heavily influence the future of a company. If you buy into a company early and invest a lot in the beginning, you’ll e seen by the company as a trusted voice in the future of the company.
When you take a risk by buying shares, you can become an important part of a company’s growth and help to direct them through challenges.
If you get involved in shares, invest in a few different types of companies and use a few different kinds of tactics so that you’re prepared to shift wherever the economy heads to.
If you’d prefer an alternative to stocks, you should try a CFD.
Property is seen as more or less and unidirectional investment. When you invest in property, you get to see a reliable growth of your investment over time. Property is one type of investment where you can get more out of it as you put more into it.
Returns from property come via the income you get from a rental, growth that comes as the value increases, or how much you get from improving the property. Some people see a home as an investment because of the gradual value increase. That increase is, however, slower than other types of increases that can come from a rental or capital improvement.
If you decide to go the route of commercial property, you don’t have to build an investment outright. In this case, you are often encouraged to invest with others or via a managed fund. When you invest in commercial property, you can often put money into an inexpensive property and see serious returns based on who you rent the property to.
Commercial property contracts are often long-term and give a high return to investors.
Putting Money Different Types of Investments Is Important
When you put money in different types of investments, you can assure that your revenue will grow in multiple ways. If you’ve ever heard someone say you need to “diversify your portfolio” that’s what this idea refers to. Different markets grow at different rates and see different ups and downs and multiple investments can protect you from drops.
If you’re looking for investment ideas for your business, check out our ideas!