There are a lot of ways to invest; picking the right one is very important. In this article we discuss the most popular forms of investing so you can make the right choice.
Stocks: a popular choice
Investing in stocks has always been popular. When you buy a stock, you become a partial owner of that company. As a shareholder, you have the right to receive a part of the profits paid out as dividends and you can also make money from the shares by selling them at a higher price at a later date.
Nowadays, you can physically buy stock or buy stock through an online broker. When you buy stock physically, you are going for long-term profit and you build up a portfolio. It’s also possible to buy stock through an online broker, which allows you to make money in the short term.
Bonds: company and government loans
Bonds are issued by agencies so they loan a large sum of money. Bonds are less risky than stocks, but they also pay out less money. A bond has a certain duration with a fixed interest rate and at the end of the duration the amount loaned will be paid back.
Bonds can also be freely traded where the price of a bond correlates to the actual market interest rate. When the market interest rate is lower than the interest of the bond, the price of that bond will go up and when the market interest is higher than the interest of the bond, the price of that bond will go down.
What was the best investment over a period of 100 years?
Options: call and put options
Options are special financial instruments that you can use combined with stocks or commodities. Options can be divided into call options and put options. It’s possible to issue options and buy options. Be careful with options, you can lose more than the money you put up when you issue an option the wrong way.
Investment funds: spread your investments
Investment funds are very popular. There are all kinds of funds: passive funds, active funds, stock funds, and funds aimed at a specific sector or geographical region. If you can think of it, there’s probably a fund for it. By picking the right investment fund, you can make more money than storing your money in a savings account.
You pay management costs for these investment funds and on top of that usually fees as well. Trading in investment funds is aimed at the long term and they are mostly used for large amounts of savings. Compare the different investment funds before you make a decision because how these funds perform differs immensely.
Forex: the largest market
Forex trading is also very popular. Forex is the biggest and most liquid market on Earth. Money is something we all use to buy everything else. In Forex you sell a currency pair to buy another currency pair. When the exchange rate changes, you make or lose money.
With Forex it’s possible to make money regardless of how the market is moving. Because the market is so liquid, prices move rather predictably and you can anticipate this movement by performing technical analysis to place orders at the right time. Trading Forex is mostly interesting for short- and middle-term trading.
Commodities: demand is the key
Nowadays you can also trade all kinds of commodities. Next to the very popular gold and silver, it’s also possible to trade crude oil and grain or corn. With some brokers it’s even possible to trade pigs! These commodities are traded through so-called futures. With these types of contracts, you agree to deliver for a certain price. When the price of that commodity moves your way, you make money.
Trading futures, warrants, CFDs etc.
Trading in all kinds of derivatives is very popular. By trading CFDs, you can make a lot of money using a small amount of money. The best thing about these instruments is their extremely low fees and the possibility to make money when the prices go up and down. This way you can always make money, even with the slightest change on the market.
Other forms of trading:
- Real estate: real estate is set in stone; well, it once was...
- Liquidities: put your money in the bank
- Patents: you either make nothing or a lot
- Green investments: when the environment is very important to you
- Alternative investments: art, culture and other collectibles
Make the right choice
It’s important that you pick the right form of investing; one that suits your style of investing. Of course, it’s also possible to combine several forms of investing. You could trade Forex for your short-term earnings and use the dividends to buy physical stocks for your long-term income.
You are responsible for your investments and it is important that you have a proper plan and strategy in place before you get started.