Money might not buy happiness, but it does give you options. Whether you are working towards a house in the city, early retirement, or a trip around the world, it is sensible to be thinking about the best ways to invest your savings so you can watch them grow. There is a wide range of investment options. We have put together the top five for new investors to consider:
Commercial Real Estate
Generally, when people consider investing in real estate, they are thinking about the residential market. However, did you know that commercial real estate typically attracts a much higher return; up to double that of residential properties? Leases tend to be longer, so you don’t have to think about finding new tenants each year. Additionally, insurance, rates, taxes, repairs and maintenance are generally covered by the tenant rather than the landlord. There are some risks of course; the cost of entry is higher, vacancy rates can be more extended, and you may need to reassess your long-term rental income strategy if the council implements zoning changes within the suburb.
High-Interest Savings Account
The advantage is that this is a low-risk strategy. The disadvantage is that the returns may not be as high as some other investment options. If you are comparing high-interest savings accounts, make sure you look for one with no account keeping fees and no minimum deposit amounts. It is also worth selecting an option which offers compounding interest rather than simple interest. The difference here is that compounding interest is paid on the principal amount and the interest you earn, whereas simple interest is only calculated against the original sum of money you put in.
The Stock Market
The stock market can seem a little overwhelming to first-time investors. Remember that buying stocks equates to buying a tiny stake in a company. If you already have strong knowledge of a specific industry and the companies that do business in that industry, then this is a perfect place to start.
Choose a company with growth potential, set up a trading account, and you are on your way! Although some people view the stock market as risky, long-term data shows an overall positive trend.
An Index Mutual Fund
If you still aren’t confident to select and purchase shares or stocks in a company, an index mutual fund is a popular option. An index mutual fund spreads your investment over a broad range of stocks and commodities across various indices. The S&P 500 is one of the best-known examples of such a fund. However, other indexes such as MSCI EAFE (Europe, Asia, and the Far East) and the Russell 2000 (small companies) are also popular investor targets.
Put simply; an index mutual fund means that you have broader market exposure, so your investment isn’t impacted heavily by the movement of one company’s performance. Warren Buffet, one of the world’s wealthiest men, recommends this investment strategy, so it is worth some consideration.
Government Bonds
Government bonds work a bit differently to shares. Instead of buying part ownership of a company, government bonds are a long-term loan to the government for a fixed period. Your principal sum, plus interest, will be paid at the end of this term, which is known as the bond reaching maturity. This is generally a very secure investment strategy.
Whichever option you chose, make sure you do your research thoroughly and understand where your money is going. Take a long-term approach rather than looking for quick wins. While there are always risks, investing your money can pay high dividends!
