The Best Bets to Invest Your Money Safely
Sun, 11/11/2012 - 8:54pm | by Guest Contributor
The current investment market does not exactly put the average consumer at ease. With the global economy still wading through the recession and stocks on a perpetual roller coaster, those looking to make their money work for them are doubtless skeptical about the prospect of investing their hard-earned ducats. And yet, stocks aren’t the only form of investment out there. There are still plenty of ways for people to safely invest their money in ventures that are bound to show a return over time (even if they don’t come close to the potential dividends offered by stocks). The real payoff is peace of mind, with a few extra bucks thrown into the mix. Here are some investments that fit the bill.
1. Real estate. Okay, so the housing market is definitely in a slump, which may make you cautious about investing in it. Are you crazy?! Now is the best time to invest in real estate, providing you can afford to pay a monthly mortgage. With short sales and foreclosures high, the term “buyer’s market” is the understatement of the century. And remember that even though you’re taking on a debt, it is really an investment in your future since most properties only stand to appreciate in value at this point.
2. 401K. Both a 401K and a Roth IRA are a great idea in this day and age. These accounts are unique from other investments in several ways. First, the money that you contribute is considered pre-taxable income. Second, they use compound interest, which means that your money is growing exponentially. And finally, returns tend to be fairly steady over time, thanks to money managers that float your money around several different types of investments. Of course, there are drawbacks. You can’t touch it before the age of retirement without paying serious penalties (not only will withdrawals be taxed; you’ll also pay a 10% fine). And you don’t really have control over how your money is invested (unless you go with a self-directed Roth IRA).
3. CDs. Certificates of deposit are generally issued by your bank (although brokers may also issue them) and they tend to deliver a better return than say, a savings account (usually in the 1-3% range). They’re nice because you can set the maturation date between six months and five years (with varying rates of return) so that your money won’t be tied up too long.
4. Mutual funds. This type of investment is similar to a 401K in that a fund manager will split your money between several different stocks. These are generally very low-risk investments that will nonetheless perform better than CDs or T-bills. Although they can’t match higher-risk stocks for potential returns, the possibility of total loss is also greatly reduced.
5. Savings account. Even online banks offer this most basic method of earning while your money sits. In fact, there’s really no safer method of securing your funds since they are federally insured and available for withdrawal at a moment’s notice (sans penalties imposed by other forms of investment). There is, however, a majordisadvantage; most savings accounts these days are delivering less than 1% interest annually, which means even a large sum in your savings account will show negligible returns.