Ways To Invest

Explains the different ways to invest your money. Examines stocks, bonds, and other ways to invest. Helps determine which investment is best for you.

So you have your money and are ready to invest. You've determined how much you will put aside, when you will need your money, took care of your debt, and determined your goals. Now it's time for you to find out what investment is for you and your goals.

One type of investment that you are probably familiar with is the boring old bank account. Here you can get about 2.5% a year ($2.50 for every $100) for the money you have in your account. Not the best way to invest but an easy way to start.

Another type of investment is the certificate of deposit (CD). CD's are a type of lending investment. With a CD you lend your money to a bank for a specific time, say 6 months, and they give you your money back with an interest rate of 6 to 7 percent compounded onto that amount. CD's are a guaranteed safe investment.



Bonds are another type of lending investment similar to CD's. Bonds can be issued by a bank or company. Through the next four years you can earn 7 percent interest through a bond (Calculate that for a $100 investment and it comes out to about $130 after four years).

The best way to make your money grow is through the stock market. Historically the stock market has on average returned 11 percent annually. However, the stock market can be the most volatile place in which you can lose a lot of your money. You must realize that risk and return go hand-in-hand.

Stocks are shares of ownership in a company. Why do companies issue stock? Companies do this to raise money that will translate into growth. The growth of the company will affect the amount of money you invested in the company.

For example, you have $1,000 to invest and you find a company that is currently selling for $10 per share. You can buy 100 shares of stock in that company. The next day, while you're drinking your coffee and looking the through the business section, you see that your company is now selling at $12 per share. What does this mean? How much did you make? You bought 100 shares and it's now $12 per share. Multiply the two and you have made $200 with a current balance of $1200 (100 x 12 = 1200). That's a 20 percent return in one day compared to a bond's sluggish 7 percent return each year.

So which one is for you? Risk is a factor that plays a big role. How much risk do you want to take? If you're a low risk taker that needs the money in 1 year, a bond or CD is the best choice. If you can take a good amount of risk, without having your stomach churn every time you hear "The

market dropped 200 points today", invest in stocks. Stocks are also a good way to invest if you don't need the money for another five years.

History has shown that financial markets recover. And the longer you keep your money in the stock market the better it will grow to achieve your goal. Remember that the biggest risk is not taking one at all.

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