As lucrative as it sounds, investment is quite overwhelming for people, especially beginners that are new to this industry. With a plethora of options to choose from, it may get a little tough for you to select an option that fits your preference and budget. The current pandemic has made it quite essential for everyone to set a small portion of their income aside for investment. Before we discuss different types of investment products, note that the best way to reduce your risk of investment is by diversification. Try to add different financial products to your investment portfolio to minimize your risk of investment.
Instead of depositing the money into your savings account, you can grow your income by investing in the right financial products. In this post, we will walk you through the 5 common types of investments that can bring the best returns and help you develop your investment portfolio. Let’s get started.
- Certificates of Deposit (CDs)
Issued by financial institutions and banks, certificates of deposits are known for offering a high interest than other accounts. The CDs come with a certain maturity date that varies from a few weeks to several years. The best product for you depends on your risk tolerance. The only issue with the CDs is that you can’t really withdraw money until it has reached maturity. If you send a withdrawal request, you will end up with a high penalty.
You will keep earning interest on the Certificated of Deposit until the contract reaches maturity. The principal amount will be returned to you once the contract expires. This investment makes an ideal choice for retirees who do not mind keeping their money in bank accounts for a while. It is a safe investment option that can result in a stable income. However, you may not be able to make a good income from CDs if the interest rates drop.
- Corporate Bond Funds
Companies might raise funds for their expansion and other development projects by issuing bonds. If you are planning to get corporate bond funds, consider short-term bonds as they offer you a maturity period of up to 5 years, and they are less likely to experience interest rate fluctuations as compared to other types of bonds. It is the best choice for those who are looking for a stable cash flow but don’t want to face the portfolio risk.
The simplest and most popular type of investment for beginners and experienced investors is stocks. Commonly referred to as equities, you get a small percentage of the ownership right of the company you are buying the shares of. You can sell these stocks when the prices increase and make a profit from your investment. You could buy stocks through brokerage firms. Nowadays, many companies offer online share trading platforms and advanced apps that are designed to help you get started with share trading. These apps present to you detailed instructions on how to trade stocks, what factors to consider when selecting the right company for share trading, and so on.
- Mutual Funds
Mutual funds has become another popular investment option for employees, retirees, and other aspiring investors. Mutual funds are often seen as an attractive investment option for all types of investors out there. The money collected from different investors is used for multiple securities. This amount is invested in different types of securities. The best part is that the cost of investment in mutual funds is comparatively lower than the money you’d spend on other forms of investment. It gives you an opportunity to diversify your investment portfolio while making significant profit from your investment.
Convenience is another reason why people prefer mutual funds. Think about it – you no longer need to go through the hectic decision-making process. You don’t have to spend hours researching the company, their plans, and how they intend to use your money. You could simply invest your money into mutual funds and leave the decision-making process to others. Even though there is no guarantee that mutual funds will generate the best returns or it will grow your money significantly over time, it saves you the hassle of contacting different researchers and brokers when buying shares.
Last but not least, commodities make another great investment product. While commodities are quite lucrative for investors, they might not always be a suitable option. That’s because the price of the commodities tends to fluctuate abruptly. For instance, certain political changes in the country can have a significant impact on the prices of oil and other commodities, which is why it’s important that you conduct proper research and invest in the commodities only if you are certain your investment will generate decent profits.
The four common types of commodities that are in high demand these days are:
- Agricultural products
- Meat and livestock
- Crude oil and petroleum products
So, these were the top 5 investment products. Some products are useful for beginners, while others require a fair amount of experience. Each investment product mentioned above come with their share of risks and rewards. It’s better to consider the risks associated with the investment before making any decision.