For the new investor, it may seem like there are a thousand different ways to invest your money. The fact is, that’s an understatement. There are virtually limitless to allocate your hard-earned funds. But not every investment is suitable for every investor. Every investment carries with it a certain amount of risk. In general, the more risk, the more possible reward. Low risk investment seldom pay out very much. So it is up to the investor to determine how much risk (and thereby how much profit potential) he or she is comfortable with.
In general, young investors carry a significant amount of risk. This is most easily illustrated in stock vs. bond allocation. Stocks are notoriously flighty. It is impossible for even the most seasoned industry veteran to say, with certainty, if an individual stock will gain or lose value, at any given moment. Bonds however are very secure. They tend only to grow, and when they lose they don’t lose much. Bonds make up the bulk of many a senior investor’s portfolio, because it is unthinkable that they will suddenly lose significant value, an outcome an older investor could not tolerate. But there are other forms of investments available as well, ones we’ll list here in degree of reward potential (starting with the greatest).
– Spread Betting – Spread bets are a unique form of day trading, built with the speed and connectivity of the internet. An investor wagers on the growth or loss of a stock or market, within a certain time period. If the investor is right, he or she wins a certain amount for every point up (or down) the market changes. Losses are gauged the same way. Because spread bets occur so quickly, lots of money can change hands in almost no time at all, making this the investment form with the fastest growth potential.
– Real estate and businesses – This is an intermediary level of risk and reward. On the one hand, most businesses fail. On the other hand, businesses run by good businesspeople tend to succeed. If you have vetted a business or a piece of real estate for inclusion in your portfolio, if you truly understand it and its place in the world, you will likely see a good return on your investment. If however, you choose your business of real estate poorly, you likely will lose money. This is intermediary only in the sense that it can go either way, but you are largely the one in control.
– Gold and other commodities. This is a low risk form of investment, though not so much as bonds. Gold, and silver and all forms of static commodities, fluctuate in value all the time. But they also have inherent value. They won’t become obsolete like electronics or your 2006 Honda. By retaining much of their original value, investing in gold isn’t terribly risky but is also a speculative enterprise. You can’t do anything to add to its value, after all. You just have to wait and see.
– Getting advice on superannuation can also be important. Using the right call to the right place can often deliver the results your looking for and minimise the risk. One website I stumbled across is even able to help you retrieve your lost super annuation. Tryout the team at Camori Investments for help with this.
These are just a few of the countless forms of investment available to you. You’ll find many more of your own, but each will fall somewhere along this spectrum of risk-reward. My choosing correctly for your goals and personality type, you’ll create a portfolio that grows and allows you to sleep at night.
***Photos thanks to Public Domain Pictures and Geralt of Pixabay***
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