The 14 Best Ways to Invest Your Money
I get emails every day from people looking for basic information about investing. There’s plenty of advanced info out there, but finding a place to actually start learning how to invest your money can be a little tricky.
This article is for people who want to invest, but are still wanting to see a list of the options.
Listed below are the ways of investing your money that are fairly mainstream. If I’ve missed something, scroll up and click the “contact” link in order to let me know what I’ve missed.
Stock Shares. This is easily one of the most well-known investments. Buying shares of a company, typically through a stock broker. Each share signifies that you own a small portion of the company. You can make money if the company shares it’s revenue with dividends. You can also sell it later if the value of the shares go up after you purchase it. Fairly risky, because the value can drop.
Commodities. A “commodity” is essentially raw material. Iron, cotton, cattle, gold, silver, diamonds, oil, natural gas — all of these are commodities. How to actually invest in commodities depends on which commodity you pick, and which investment vehicle you’re interested in. In the future, I’ll write a guide that will explain the ways of investing in commodities, so subscribe and stay tuned.
Debt Repayment. This is easily the most common way of investing, and absolutely everyone should focus on this first. If you have credit card debt, don’t buy stocks or spend your money on any other investments. Focus on paying off your debt. This will provide you with freedom, and will help you get rid of financial risk. Paying off interest-sucking debt is easily the investment everyone should be focusing on until they’re debt free. This is very low risk.
Foreign Currency Exchange. This is probably the most risky “investment” for beginners. It essentially involves predicting the buying power of different currencies in relation to other currencies from other governments. If this sounds complicated, it probably isn’t an investment arena you should be considering. This is extremely high risk.
Gov/Corporate Bonds. Bonds are essentially ”debt securities” in which the borrower owes the investor a certain amount of “debt” and is required to pay the principle and/or interest at a later date. These are typically extremely low interest — but can be high interest earning as well. Chances are, the higher the returns, the more the risk. If there’s a default, you could get stung. Moderate risk.
Annuities. An annuity is part insurance, part investment. It’s when an investor gives money to a life insurance company in order to be paid a smaller amount of money consistently over time at a later date. Depending on the contract with the life insurance company, the later payments to the investor will either have a “stop” date, or will continue until the death of the investor — whichever comes first, obviously. You can lose your money if the insurance company goes bankrupt. Moderate risk. Most states will cover your investment up to $100k if the company defaults — you’ll need to check your state.
Bank Accounts. Banking accounts should almost never be used for investments — the returns are very low. They should be used as ways of storing cash. Bank accounts are great — but they’re not great investments. There are a variety of different types of bank accounts: personal checking accounts, personal savings accounts, business checking accounts, business savings accounts, Certificates of Deposits, etc. These are almost always insured by the government via the FDIC. Of course, don’t forget: the FDIC is completely bankrupt.
Start a Business. This was my first investment. Starting a business is stressful, financially risky, and you can end up losing everything. Still, if you pull it off right, you can build a fantastic income, build a financially free lifestyle, and be your own boss. This is extremely risky — but potentially extremely rewarding.
Real Estate. Many families have their main investment in the form of a home. Some go beyond just the home and purchase other properties to either flip or to rent out. While I’m not a big fan of having a mortgage — I actually rent a small house, and have no immediate plans on looking for a home to purchase — real estate can certainly be lucrative if done correctly. Owning properties in order to build an income from renting them out is a popular method of building a passive income. Relatively high or low risk, depending on how it’s done.
Precious Metals. I’ve talked a lot about precious metals — gold specifically — over the last few weeks. Precious metals are often used as a type of disaster hedge — their value goes up when the value of all other investments generally drop. I’m bullish on gold, have pointed out that gold hasn’t yet peaked, and have even written a guide for first-time gold investors. Depending on how you invest, precious metals are either really risky or really secure. Buying straight-up gold bullion is probably the safest financial moves you can make for wealth preservation — but you risk not getting much returns.
Peer 2 Peer Lending. With the rise of the information age and the ease of networking in a digital era, it’s possible for you to lend money to other consumers — you can act like a little bank. Websites like Prosper and Lending Club make this easy. Fairly high risk, because the borrowers can default.
Collectibles. I considered not adding collectibles as “investments” but decided to go ahead with them. Collectibles can include baseball cards, famous artwork, old coins, classic cars, old dishes, and almost any other stuff that traditionally goes up in value due to collectibility and scarcity. This is high-risk, and requires a substantial amount of expertise in order to make it even close to worthwhile.
Education. This is going to sound cliché, but it’s so, so true. A good education is the best financial investment you can make. This doesn’t necessarily mean college — it means self-education. Learn about economics. Learn about starting a business. Learn how to think systematically. Learn about business models. Learn basic accounting. Learn how to speak publicly. Do all of this and your financial security will increase exponentially. This is low risk, obviously.
Venture Capitalism. Though most people won’t ever go this route, it’s still an option. Lots of small companies are still in the “start up” stage. They’re high on hopes and dreams — but low on money. If you step in and offer money in exchange for a small portion of ownership, you can essentially make money on their growth. If they’re competent and know what they’re doing, you can get huge returns. Just imagine if you were one of the venture capitalists investing in Facebook when it was still in startup stage — the sky is the limit. This is extremely, extremely high risk. Most businesses fail.
Investing is the art and science of spending money in order to eventually make even more money.
When it comes to investing, I prefer to focus on security and income, as I explain on the Stand Strong Research “about us” page.
I’ll be editing this page over time. If you have an investment idea you think should be covered, scroll up and click the “contact” link and let me know — I’ll personally respond to the email.
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