A true Harry Potter fan must have shed a tear or two when Albus Dumbledore told Harry Potter “It is our choices, Harry, that show what we truly are, far more than our abilities.” Truly a word of the wise. Thank you, Albus!
It’s the choices that we’ve made that eventually led us to where we are now. We are faced with a lot of choices everyday. Investing is no different. So you’ve decided you want to invest… but how? Let us break down your options.
You’ve probably heard about the term “stock market” a gazillion times before but don’t really know what it really means (or maybe you do, no judgment here). Stocks, otherwise known as shares, are intangible items that represent ownership in a company. Basically, when you buy a stock by giving a portion of your resources, usually cash, you are providing capital to a company in exchange for your claim to their assets and earnings. More on stocks in our article: “Stocks – The What, Who, When, Where, Why and How.”
Now you can earn through stock investing basically in two ways. You may choose to keep your stocks and earn through dividends, a distribution of a portion of the company’s earnings to its owners; or you may choose to sell those stocks when their value appreciates, hence you get to earn a profit. More on how stock prices change in our article: “9 Reason Why Stocks Change Prices Every Second?”
The stock market is where buyers and sellers of stocks meet to trade.
Bonds are considered “debt investments.” Basically, when you buy bonds, you are lending money to a corporation. Bonds are payable after a period of time, which makes them less risky than stocks. One can earn through bond investments in two ways – you can earn through interest income, which is paid by the company periodically based on the face value of the bonds; or, like stocks, you may also trade the bonds for a profit.
Real estate consists of properties such as land and buildings, along with the natural resources that go with it such as crops, water, minerals and the like. Engaging in the real estate business entails buying, selling and/or renting land, buildings or housing.
The real estate business requires time, customer service and the bucks to run your business. However, if you do it right, you will be rewarded with high returns.
Cash equivalents are investments you can quickly convert to cash. The most attractive form of cash equivalents are money market mutual funds or ETFs, as it produces higher yields than your typical bank savings account. So if you got even a few thousand dollars to spare from your savings account, it’s better to place those in money market funds to get more bang for your buck.
It is also possible to invest in precious metals such as gold, platinum, silver, palladium, rhodium, iridium and the like. You may invest in precious metals through purchasing it physically and hold it as it appreciates in value. Other options include purchasing an ETF, a bullion fund, or a futures contract for a particular metal. More on futures contract in our article: Futures and Forwards 101.
If you think you have the mind and spirit of an entrepreneur, then maybe you should consider putting up and running your own business. This investment option enables you to do whatever you are passionate about and earn money from it.
Entrepreneurship is not for everyone, though. It requires patience, hard work and dedication. It does not usually go smoothly when you first try it, but with the right acumen, it is possible to gain unbelievable returns!
It is important to note that these investment options entail different levels of risks and rewards. Knowing your options as investors is just the tip of the iceberg. You also need to do ample research on how you can win, how you can lose, and the ins and outs of where you are trying to invest.