Three Lucrative Financial Investments

Lucrative Financial Investments: 3 Ways to Invest Capital

Making a financial investment can be a lucrative way to allow your finances to work for you. If you have finances lying around, why not use your money to make money? Investing your hard-earned cash can definitely be rewarding, but keep in mind it will require a wise decision.

Financial Investments

As an investor, the ultimate goal is choosing options that yield a high return on investment (ROI) in a timely manner. In other words, most individuals would prefer getting their return sooner rather than later.

Nevertheless, investments that yield high returns quickly are typically considered those of a high risk. This leaves an investor with a tough decision to make: choose a financial endeavor that yields a faster (ROI) which is risky, or choose the long term investment which is not as risky, but it takes longer for a (ROI).

Investors who are looking for returns that are not as risky, long-term financial endeavors are the safest option. Conversely, a higher risk can yield a faster return, but you also take the chance of rolling the dice.

3 Types of Investments

In the early days, only one source was needed for income to pay a home mortgage. During these times, the husband was the main source of income: the wife would stay at home, raising kids, cooking and cleaning.

Fast forwarding to the 20th century, mortgage payments are much higher. It generally takes two sources of income to pay a mortgage. To live comfortably, people need alternative ways to earn revenue in the world we live in now. Given these points, financially investing your finances could be the extra source of income that secures your financial situation.

The 3 main financial investments are stocks, bonds and cash equivalents. A majority of individuals choose either stocks or bonds. Either way, if you make a wise decision and do your research, your bank account will grow.

Stocks

Stocks are by far the most popular of the three financial investments. When you purchase stock options, it can be rewarding as well as unrewarding. It all depends on the entity that you invest in. These days people don't need to go to Wall Street to purchase stock options, stock can be purchased online.

By purchasing a company's stock, you're buying a percentage of the company, called a share. The value of every company fluctuates daily. Some companies' values may rise for a month, then decline. Whereas other companies may decline for a month, then rise. As an investor, you never know what's going to happen.

In the past, rich and wealthy individuals were the only ones acquiring shares of stock. Moreover, some middle-class people also afford shareholdings, but the lower-class could not afford to buy shares, as most institutions require minimum investment. Nowadays, almost anyone can afford to purchase shareholdings. For instance, you can buy shares under $1 if you invest at RobinHood. You can also receive up to $500 in free stocks for referrals.

Robinhood prides itself in providing average people access to financial markets. Over 10 million members are actively buying, selling, and trading and you can too with no startup fees. Components of stocks:

  • Growth stocks
  • Yield stocks
  • New issues
  • Defensive stocks

If you stay committed to learning and researching information pertaining to the company you choose. You can increase your chances of staying ahead of the curve and profit.

Bonds

For the most part, a bond is an I.O.U. between a lender and a borrower. It's the action of loaning the government or a corporation money paid back with interest. Typically, bonds are issued to the public when the government or corporations need to borrow money. Many individuals choose this market for one reason, the market yields over $43 trillion fluctuating dollars.

Generally speaking, people presume bonds are safer than stocks. However, you must consider the credit quality of the asset you're doing business with. For instance, a government IOU will likely have great credit worthiness. Whereas an independent credit agency could pose a risk of default. In other words, you would not get paid the interest on time. Therefore, it's important to research the credit quality of the asset that issues the bond. Components of bonds:

  • Federal government bonds
  • Treasury bonds
  • Zero-coupon bond
  • Municipal bonds

All in all, just know this endeavor is a long term financial agreement. Therefore, if you choose this type of underwriting, your cash will be tied up for a while.

Cash equivalents

Cash equivalents are financial short-term investments that are not as risky. This type of underwriting can be converted to cash fairly quick. An underwriting is considered to be cash equivalent when it is highly liquidated and has a short maturity of 3 months or less. Components of cash equivalents:

  • Treasury bills
  • Commercial paper
  • Marketable securities
  • Money market funds

Banks typically exploit cash equivalents. However, there are ways people can exploit and profit from cash equivalents.

Post a Comment

0 Comments