Investing can undoubtedly be a great decision to make in life, but it can be challenging to know where to begin. You’ve probably read the media and seen how risky some types can be, but it’s important to remember that there are smart ways to diversify your finances.
In this article, we are going to talk about six investment types and their risk factors so you can make that decision. Interested? Then keep on reading!
1. Real Estate
When it comes to investing in real estate, there are a couple of different ways to go about it. Firstly, you can choose to purchase and rent out a property, and secondly, you can purchase, renovate and resell for a larger value. Compared to many other investment types, real estate is much less volatile. While the market can change, it isn’t going to fall to zero suddenly.
When an individual purchases a stock, they are investing in a company and their profits. It can be described as buying a share in that particular company. While there is an excellent chance of making a high income from stocks, it can also be quite risky. When the market changes to follow the “next big thing,” you’re stuck with something that nobody wants. Check out these other risk factors when investing in a company.
3. Precious Metals
Investing in precious metals such as gold and silver can be considered a great way to diversify your portfolio, as the value of these generally don’tn’ decrease. That being said, there are risks to consider that are quite different from other investment types. For example, things like trading interruptions, theft, and exchange rates are all things you’ll need to think about.
4. Certificates of Deposit
Certificates of deposit are a popular investment type for beginners as they can be opened at most banks. It involves an individual leaving a lump-sum deposit for an untouched period of time, which entitles them to high interest. It is one of the safest options as you are guaranteed return, even if it is lower than other investment types. Check out https://youngandtheinvested.com for more information on the best income-generating assets.
5. Mutual Funds
If you are uncertain about investing on your own, mutual funds are the way to go. These funds pool money from a variety of individuals to invest in things such as stocks or bonds. It’s perfect for individuals that want to start with a smaller amount of finances. While there will still be market risk, it isn’t as intense as taking everything on by yourself.
Digital currency has sparked a lot of controversy over the past few years, however it is still a very popular investment type. While it can offer a very high return, cryptocurrency has exceptionally high volatility. Just as quickly as it can go up, it can go down, leaving you with nothing. It’s also not accepted in every country, leaving the future of its existence uncertain.
And that’s it! These were six investment types and their risk factor.
What do you think? Would you consider any of the types above?