In my previous articles, we talked about investing in general, but it occurred to me, after learning a lot about the downside of investing in the market that not everyone wants to invest in stocks. At least not all the time. So, what are our options? For example, what if you want to take all the risk out of your investment but still make a return? Well, there are ways to do that, but remember the old saying, “the lower the risk, the lower the return.” Or maybe it’s, “the higher the risk, the higher the return”? Either way, they are the same in principle.
I thought it would be helpful to share some brief information. These are basic investment options for beginners. You know, us Rising Investors, so here you go.
The least risky investment is putting your money in a savings account. I found a variety of rate comparison sites. It’s, of course, as simple as putting your money in a bank account and collecting interest. Here’s one from Forbes that seems pretty frequently updated and is not trying to sell you something (Forbes.com).
Even the higher yield savings accounts don’t offer much of a return, but it’s a start. The advantage is that you can have access to your money easily. If you feel like you can park your money a little longer, you can make a little more interest in a Certificate of Deposit. Here is a tool to compare CD rates (Mybanktracker.com).
The next step up is the Mutual Fund. Mutual Funds are basically a group of stocks. And there are a ton of them. In essence, when you buy into one of these funds, you are diversifying the risk from just one stock. The advantage here is that there is a fund manager selecting the stocks for each fund and knowing when to get in or out of any particular one. Of course, you must pay the price for this. Mutual Funds have fees. Here is an article that will help you learn more about this (Times.com).
If you want to have the diversity of a Mutual Fund but want to get a little closer to investing in the market, you might want to consider an ETF – which stands for Exchange-Traded Fund. The name says it all. You can buy an ETF on the stock exchange directly from whatever your stock purchase platform of choice is. Here is more detail on what investing in an ETF is all about (Investopedia.com)!
Hope this helps!