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Use Investments to meet Financial Goals

If you are planning to invest money, you are probably aiming to increase your wealth and put your savings to better use. After all, what is the point of simply leaving your cash in a savings account that offers you an incredibly low interest rate? Before making the decision to enter the world of investments, you need to know where to invest, as well as how to invest your money.

Where and how to invest

Generally, there are three different types of investments, namely ownership investments, cash equivalents and lending investments.

In terms of risk, ownership investments are probably higher up on the scale; however, these are the investments that tend to yield the best returns. They include investing in stocks, businesses, real estate and valuable objects. 1 When you invest money in stocks, you own a part of a business and thus share in its successes – or in its losses. When you invest in real estate, it all depends on the state of the market when you wish to sell again. The state of the market, along with the overall condition of the property, will determine whether you will make a profit or a loss. Investing in real estate is actually quite an art, which is why so many people look to brokers and realtors for assistance. Lastly, when you invest in valuable objects, such as cars and gold, you need to keep in mind that the market, once again, is unstable and that the objects will depreciate in value over time.

Lending investments include your savings account as well as any bonds that you might have. Bonds are fixed income securities and refer to the process of ‘lending’ your money to businesses or to the government for a specific time period in exchange for a set interest rate. 2 The longer that you choose to lend out your money, the higher the interest rate will be. The amount that you invest will also have an impact on the interest rate that you will receive. These investments are low risk; however, they do not present you with the opportunity to enjoy large financial gains similar to that of ownership investments. Despite this fact, they are definitely good choices for all investors as they are very easy to manage.

Cash equivalent investments are easy to convert back into cash, making them the ideal choice for those who are looking to invest but who don’t want to lose control or access to their finances in the process. Money market funds are a good example of this type of investment. The returns are small, but the risks of experiencing any losses are low.

Before making any decisions about your savings and investments, it is always wise to consult with someone who has a lot of experience in the field, or with a professional who can appropriately advise you. The real key to reaching your financial goals through investments lies in your ability to plan ahead and make smart, long term decisions with regard to your funds. Happy saving!