Investments can reap big rewards if you create a diversified and balanced investment portfolio. Of course, any investment carries risk, so you should know what you’re getting into and how much risk you’re willing to handle. Your investment portfolio should include an array of investments like:
- Mutual funds
These investments should have varying risk levels in order to keep your portfolio in balance and save you if one of your holdings diminishes. If your assets are widespread, you won’t lose your whole investment.
If you invest in stock, you’re buying shares of ownership of a company, meaning you share in the growth and profit of the company. Stocks usually give a higher rate of return than other investments, but are also more volatile. If you can handle the risk, you can earn a lot from investing in stocks.
When buying a bond, the agency or corporation you buy it from uses your money to fund a program, and in return for your investment in their venture, you receive interest payments. Eventually, you are paid the bond’s face value plus interest. All investments carry risk, and while bonds are safer than stocks, they are not an exception. You risk the chance that your issuer will not be able to make payments, and you also have to consider inflation. Look at Moody’s, A.M. Best, or Standard & Poor’s to analyze a company’s strength.
A mutual fund is a good investment, as it’s like its own portfolio. When you invest in a mutual fund, you’re making an open investment of a diverse group of stocks that an investment company buys and sells for you and other shareholders. The portfolio can range from a handful to hundreds of stocks, and you’re an owner of a piece of it. The benefits here are that you can invest a small amount, you’ll have a professional handling it, you have diversity without even trying, and you’ll have liquidity.
Other investment options you can consider include real estate investments, options, futures, and precious metals. The most important thing to remember is that no matter where you invest, you should have set goals and stick to them. Investing consistently over the long-term to achieve your goals is the best way to succeed. Be specific in your goals, as it will help you determine exactly how much you’ll need to save to reach them.