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If the word investing conjures up images of frenzied, well-dressed men on Wall Street, we’ve got good news for you. While there’s plenty of people who do trade on the New York Stock Exchange, there are ways to invest outside of the stock market. It’s never too early to think about your financial future. However, how you invest is different, depending on your age. Here are seven of the best kinds of investments you should consider when looking to invest your money.
Money Market Fund
Not to be confused with money market accounts, money market funds are a low-risk, short-term investment option that can be turned into cash relatively quickly. In a nutshell, these funds are fixed-income mutual funds that are a cost-effective solution for investors looking to protect their retirement funds. It should be noted that while this type of investment carries less risk when compared to traditional stocks and bonds, they’re better suited for an older demographic who are at or nearing retirement.
Savings Account
High-yielding savings offer higher rates of return than ones you open in person. You can also open a cash management account, which is similar to a savings account but set up through brokerage firms. These types of accounts are best for people who need limited access to money and are new to investing. You should try to put away three to six months of monthly expenses for an emergency fund. Even if you’re savings are for a big-ticket purchase in the future, having this reserve creates a safety net in case you lose your job or need the money for a medical emergency.
A savings account is also a good place to start when you’re just starting out and may not have a lot of money to invest, especially if you have to start paying back your student loans. One way to save more money for investing is by refinancing your student loans. You can use a student loan refinancing calculator to get a rough idea of how much you save each month. Lowering your monthly student loan payment can give you even wiggle room to invest in multiple financial products without going in the negative.
Certificate of Deposit
CD accounts are technically saving accounts that are insured federally. They provide a fixed interest rate for a specific time period. You can choose between one to five years to allow your money to grow. So, if you have a specific purpose in mind for your money, such as buying a new home or starting a family, CDs might be worthwhile investment.
Government Bonds
Although not the most common form of investment, you should also consider government bonds. Bonds are backed by the government, making them an almost completely risk-free option. To explain how they work, think of bonds like a loan, which pays you interest over a set period of time. This can range between one and up to 30 years.
Dividends
Dividend stocks are cash payments that are paid to the shareholder. They’re almost always associated with profitable corporations who have a stable financial history. First-time investors or those who are retired may want to consider this option, depending on how much you have to invest and your overall financial stability.
Real Estate
Although technically an investment, real estate is a completely different type of financial instrument. If you have the money, you can buy fixer-uppers, redo them and then list for resale or as a rental. Depending on where the property is located, this can be quite lucrative and become your main source of income.
Individual Stocks
When you buy stock, you own a portion of a company. And even though you can net a huge return, the stock market doesn’t always play fair. You need to understand the ins and outs of investing prior to buying stock. Buying individual stock is best suited for investors who are well-versed in trading and have a diverse portfolio.
