There is a difference between spending and using your money. Spending your money means you are consuming products (most of which you dot need) whereas using your money means you are investing it in a potential source or asset to multiply your investment and enjoy profitable returns.
It’s important to manage your finance and invest in a business, property or different investment options. A safe investment is among the most profitable way to make money. Following: we will share a brief guide to help you get started.
Benefits of Safe Investment
We will explain why you need to invest in Safe investment Opportunities by describing its benefits:
Have you ever heard of “Money Makes Money”?
You can earn an extra income if you invest in quality investments. The return of these investments is another source of income. You can use it to support your lifestyle, fulfill your dreams or reinvestment.
Inflation raises your cost of living and impacts your financial stability. But you can outdo inflation if you generate positive real returns over a long term. Invest in assets with high potential capital growth for a high-income return.
Saving is important, but your money won’t breed by itself. You need to use your money with different investment assets. Different assets generate different returns. Invest in shares and property as they have they offer the best returns. These assets earn capital growth over a long time and offer ongoing income returns, like dividend from shares.
Following, we will describe investment opportunities with most potential
Certificates of Deposit
A bank issues these CDs. These offer a higher interest rate as compared to a savings account. These are federally insured time deposit with a pre-set maturity date. The maturity date can range from weeks to years.
You cannot withdraw before the maturity date, or else you get a penalty. The financial institutions pay interests at regular intervals. As the CD matures, you get the principle back with accrued interest. These have reinvestment risk. It means you will earn less when re-investing principle or if interest rates fall.
Money Market Mutual Funds
A popular cash management tool, but it’s not as safe as compared to a savings account or CD. It is the primary management of short-term investments. Mutual Fund Companies have professional researchers, analysts, and traders who manage large groups of investors and their money with a small increment return.
You can deposit or withdraw whenever you like. These funds have higher minimums and limited liquidity. It lets you use investment money and funds with a higher premium, and pays a higher yield.
The only issue is, you won’t be able to keep up with inflation rates. These Funds keep a stable share value, but no promises.
Money Market Accounts
These accounts are FDIC insured. Don’t confuse them with money market funds as FDIC doesn’t insure them. Money Market Accounts earn higher interests as compared to savings accounts, but they also need a higher minimum balance.
Money Market Accounts impose more restrictions, especially on withdrawals. Compare the rates on Different Money Market Accounts to find the right option for yourself.
It shares the same issue with some of the previous entries, Inflation. If the inflation rates exceed, then you lose your purchasing power.
It is a contract with an insurance company, you give them your money to manage, and they offer guaranteed returns. The interest on these annuities is tax-deferred as they are not liquid. It means you don’t have easy access to these funds.
These investments have a specific return rate. Therefore you know what you will get. Fixed Annuity sounds like Certificate of Deposits. However, it offers a better rate and relies on the insurance company’s finance which issues the annuity.
Even though the insurance company issues these, State Authorities monitor these companies and require them to keep a large reserve account.
Wise Money Tools can help guide those who are interested in these types of annuities.
Government Bond Funds
Government Bond Funds are mutual funds which invest in debt securities. The Government itself issues these bonds. These funds invest in debt instruments and mortgage-backed securities. These Bond Shares are highly liquid, but their value change depending on the latest trends. Investing in Government Debt Insurances is one of the safest and most profitable investments.
It doesn’t matter if you want to bank for life. Government bond funds work with different infrastructure. It’s easy to understand. But like other funds, it loses profits with inflation and fluctuation.
Yes, when interest rates rise, the price of bonds goes down and if interest rates decrease, prices of bonds rise. The interest rate is a risk for long-term investment.
Short-Term Corporate Bond Funds
Corporations raise money by issuing bonds to investors. Small investors enjoy exposure as they buy short-term corporate bond funds. These bonds mature in one-five years. These corporate bonds are highly sought after because you can buy or sell them anytime.
Moreover, you can reinvest in income dividends and invest more. But you can suffer capital losses because these bonds are not FDIC insured. Investment grade short-term bond funds reward investors. The issue is, these rewards come with risk because it’s likely the company will downgrade their credit rating or land into financial mess taking the bonds with it.
Treasury Issued Security
Investment issued by a Government is considered the safest. These include Series EE/E or Savings bond with Treasury Bonds, Notes, and Bills.
The Government can repay investors. Therefore, it can sell securities, collect taxes and print out more money. Plus, other countries tend to invest in a foreign partner because they understand the fluctuation of its currency over time.
Investors look for these opportunities thanks to their high levels of security. In some cases, these pay current interest while in others the person has to buy a discount and get their money back as the bond matures.
The only reason why most people don’t invest is that the market is tough to predict. Nothing works for a long time, and you need to change your approach from time to time.