Compare the Best Investment OptionsUnless you have a GIC account, which is FDIC-insured for up to $100,000, there are no truly ‘safe’ investment options. By ‘safe’, we mean an investment that guarantees you a return. Whether a short-term or a long-term investment, and depending on the time horizin of your investment, your principal investment may decline in value—or provide a return. There is no better example to demonstrate this than Bitcoin (BTC). On December 15, 2017, BTC price spiked to $19,650. One year later, the cryptocurrency dropped to $3,183. Today, BTC stands at $11,325—still far away from its 2017 peak. Depending on the point of time in which you bought BTC and sold, your investment was either a massive success or a massive failure. To a lesser extent, the same can be said for the stock market. It is much less volatile than the cryptocurrency market, but events such as pandemics can upend it just the same. With so many investment options at your disposal, which one is the right one?
Get Smarter with Your InvestmentsA smart investment is a safe investment. If you want a truly ‘safer’ investment, you should consider certificates of deposits (CDs), municipal bonds, guaranteed investment certificates (GICs), money market accounts, and Treasury Inflation-Protected Securities (TIPS). Such investment options are safer because they are guaranteed by the government. In the US, the Federal Deposit Insurance Corp. (FDIC) insures deposits up to $250,000 per depositor, per FDIC-insured bank, per account ownership category. . In the US, popular tax-advantaged accounts are the Roth IRA and Roth 401(k). The primary advantage of this type of account is that investment returns grow tax-free. They differ in the way they hold contribution limits per fiscal year, whether your funds are locked for a period of time or not, and whether your contributions and withdrawals are tax-deductible or tax-free. However, such accounts are merely vehicles to slightly reduce the burden of taxation. You will still need to ensure your original investment generates some sort of steady income. With guaranteed/insured principals via government registered and regulated accounts such interest returns are quite low—usually under 2.5%. For greater returns, stocks, ETFs, and mutual funds are the name of the game. Fidelity, Personal Capital, and Betterment should remain at the top of your list for best brokerage accounts. These online investment services combine both IRAs and robo-advisors to seal the deal. Today’s robo-advisors are adeptin guiding your stock trading decisions based upon your pre-determined risk thresholds. Some are even designed by Nobel Prize laureates in the economy category. On the other hand, if you wish to become an active trader, engaged in short selling and day trading, there are no better online investment platforms than Robinhood, Fidelity, and eToro. All three have zero commission trading and offer fractional shares, with which you are able to buy a slice of even the most expensive shares on the stock market. eToro has an additional trick up its sleeve with CopyTrading — copying trades made by successful, professional stock traders.
Investment Advice: FAQ
What are investments, anyway?Strictly speaking, financial products that are bought for the specific purpose of generating profits or income constitute an investment. Furthermore, there are three types of investments:
- Cash equivalents. hose assets that can be quickly and effortlessly transferred to cash without significant loss, such as money market funds.
- Lending investments. Bonds, savings accounts
- Ownership investments. Marked by high volatility but high profitability, ownership investments cover stocks, ETFs, real estate, precious metals (silver, gold), and collectibles.
How to Invest Your Money?Aim to diversify your investment portfolio with the right asset mix. If you have the appetitie, set aside some funds for a cryptocurrency (BTC), some for the markets (blue-chip stocks are the most stable, while penny stocks are the most volatile), and some for bonds and mutual funds. With various tax-advantaged accounts, you can alleviate your tax burden, but be careful not to exceed the maximum contribution per fiscal year to avoid paying penalties.
How Does Investing Work?Your originally invested asset is called a principal. A principal is deployed to generate profits or income, with three basic investment strategies:
- A long-term investment where you count on the power of time to accrue interest on your investment.
- Avoiding selling out (stock, cryptocurrencies) even when you could make money. With a longer investment horizon, you could grow your returns, especially if you look at reinvesting dividends…
- Maintain the right asset mix. Diversify investments across multiple types of investments and stocks, so each one has a chance to offset the potential loss.