Where Should I Invest My Money?

Money to invest but don't know where to invest it? Take this test to discover the best investment choice for your personality.

A dictionary definition of investment might read, “the action or process of investing money for profit,” but let’s take a look at what those investments might be. Basic investments fall into three broad categories:

1. Ownership Investments – these include stocks, business, real estate, and precious objects such as metals or collectibles. This type of investment is the most profitable, but also the most volatile.

2. Lending Investments – these include your savings account and bonds. On the whole, these types of investment are lower risk than ownership investments and therefore offer lower returns.

3. Cash Equivalents – this type of investment is easily converted back into cash and includes money market funds. The returns are very small but they are also very low risk.

A further investment category to consider is education. Investing in your education can increase your potential to earn a higher income, and with knowledge said to equal power, education can open the doors to realizing your full potential in whatever it is you choose to do.

Choosing the right investment opportunity for you depends largely on your financial goals and whether they are short, medium or long term. You may need your investment to provide a steady income, you may need money for something you plan to do within the next five to ten years, or you may be planning ahead for your retirement in thirty years from now, but ultimately, the amount of risk you're prepared to take with your money will be the deciding factor.

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The Golden Rules of Investing

Anyone can be an investor, but becoming a successful investor takes time. Consider these golden rules before parting with any of your hard-earned cash.

High Returns Come with High Risk:

Any investment that can double your money in a matter of months is going to be extremely high risk. Unless you’re prepared to risk losing it all, invest your money in something that offers lower returns over the longer term.

Knowledge is Power:

If you don’t understand an investment, don’t invest. Losing money on early investments is par for the course as a beginner so start small and learn the ropes through experience before putting your money into investments you don’t understand. If in doubt, don’t – and invest time in your investment education instead.

Put Your Eggs in More Than One Basket:

Diversification is the key to spreading your investment and minimizing your risk. It may not be as exciting as potentially doubling your money overnight, but if it’s high risk you’re after, you might find gambling suits you better than investing.