This article from Roy compares investing your money in the bank vs investing in the stock market.
Best Ways To Invest Money
Investments and Savings are an integral part of financial lives today. There have been cases when even the richest person had died a pauper. Here are some ways which are regarded as the best for investments and money management.
‘Anybody can earn money, it’s the savings and investments that count’, is an adage that has become more fitting in the modern world. In today’s fast volatile world, investments have become a catchword in the financial world. Once the necessary expenses are taken care of, one has to decide which is the best way and place for them to invest their hard earned money.
One should make investments in a safe and sane manner. Before deciding to invest money, one should set aside their daily and monthly expenditure. One should also set aside the necessary amount to pay for any bills at the end of the month. Only a percentage of the monthly income should go in investments. Simply put, the amount put out for long or short term investments should not affect your daily lifestyle or liquidity.
A safe, cut and dry method of saving money is the bank. Banks offer you a set interest for the amount of money you deposit with them per month. The interest rate can be anything from 2 percent to 2.5 percent. Bank accounts are known to be the safest and most flexible, if not the best way to invest money.
Another type of investments that banks offer are bonds. Some private institutions like companies also offer bonds. There is little difference between bonds and certificate of deposits. A bond also pays out around seven percent as interest for the period of four years. Bonds should be invested in only when there is no immediate need of the money for a set period of time.
Other than bank accounts, banks also offer ‘Certificate of Deposits’. Under this scheme, the banks offer a set interest for the amount of money you deposit with them for a set amount of time. The timespan varies from case to case, but the general span is six months to two years.
The banks offer six to seven percent compounded interest on your deposits. ‘Certificate of Deposits’ are a time honored and time tested way of investing money. It is also one of the safest ways of investing money. Sometimes banks offer a higher percentage like eight to nine percent.
Such accounts, certificate of deposits and bonds are normal and safe ways of investing money. Though the returns on such returns are less, they are preferred more because depending on the bank or company you deal with, the returns are guaranteed and also depended upon.
Another way of investing money is the stock market. One can buy stocks in a company as an investment in the company. Stocks are shares in companies which can be bought by individuals or other companies. The stock market has always given robust returns of investments. For example, a person can buy stocks in a company for $5 and the next day, the cost of the shares could be as high as $8 per share. This is a perfect example of ‘making a killing at the share market’. The stock market returns as much as ten to twelve percent annually.
Though there have been many stock market crashes throughout the world, the stock market has always come back with a vengeance. Therefore, in hindsight, the best way of going with money to the stock market is by investing a small amount and keeping it in the market for a while.
However, one has to be very careful while investing in the share market. There is no other institution concerning finance that is as volatile as the stock market. While the above example quotes a rise of $ 3 in a day, chances are that the share prices may fall to a minuscule $1.
Therefore, it is suggested that one should make a proper study of the company one is investing in and also the share market before investing anything in the share market.
| By Roy D’Silva Published: 4/1/2007 |
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Categories: Investing advice
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