Where to Invest?
The answer to your question really depends on how much money you plan to invest, the return you expect on your money and the amount of risk you want to assume. Where to invest depends entirely on these factors.
Remember, the more risk you take, the higher the potential return. Likewise, a lower level of risk, will also give the investor a lower return. For example, if you are looking for safety in an investment, U.S. Treasury Bonds or T-Bills offer the investor a guaranteed return, although that return is currently quite low due to the low interest rate environment in the United States.
After Treasuries, money market CDs or certificates of deposit offered by many financial institutions also offer a high level of safety, but a low return.
Corporations and municipalities offer a higher rate of interest for your money than U.S. Treasuries, but carry a slightly higher level of risk depending on the corporation or city issuing the bonds. A blue chip company or large city will tend to have bonds with lower yields but also with lower risk, while a start-up company or a small municipality will tend to offer bonds with significantly higher rates of return.
Descending the ladder of risk now takes us to corporate stocks. Stocks represent ownership in a corporation. Each share represents just that, a share in the profits of that company. Corporations typically sell investors part of their company through a stock offering in order to raise capital to expand, invest in infrastructure or develop new products.
Owning stock has been a traditional investment for many people and can also be done by investing in mutual funds. Nevertheless, many investments with higher levels of risk are available, if that is your investment criteria.
By InvestorGuide Staff