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WHAT TYPE OF INVESTMENT IS GOOD FOR YOU?

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The finance world is generally considered quite intimidating and complex by most of the people, especially a layman. However, once you get the hang of it and enter it, you notice that it is quite easy and a fun world. The world of investments is one such part of the financial universe, which is inherently simple, once you understand its major concepts as well as its associated lingo.

 

Different types of investment choices

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There are different types of investment options, which you would know, if you are familiar with the investing world. Among them, the main ones are Bank accounts (in the form of Fixed Deposits and Savings Accounts), Bonds, Stocks, and Mutual Funds. These are the very common or mainstream investment options, which many people know.

However, there are other investment options too that are not very popular. These types of investments are known as alternative investments, which include peer to peer lending, Binary Options, Futures, Forex, Gold, Real Estate, etc. Among all these alternative investments, this article will focus on four investments, which are Savings Accounts, Peer to Peer Lending, Binary Options, and Forex.

Is a Savings account investment really beneficial?

Let us look at the investment through a Savings account from a personal point of view.

For instance, John earns $40,000 per month. His monthly expenditure is $25,000 and he is able to save only $15,000 per month. As normal it is, he plans to put all this remaining money in his savings bank account on which he gets 8% interest per annum, which equals to only $1,200 in a year. This means that John gets only an additional $1,200 in a year over his invested amount in a bank.

 

This is almost nothing as compared to other investment options, as it generates almost zero interest. And, if you want to get a decent amount of money, you need to save or invest more, which means your principal amount should be much more. And, this is nearly impossible for most of the people out there, as their salaries are not that much.

 

On the other hand, if you opt to invest in Binary Options, peer to peer lending, or Forex, you receive a decent return even on a small principal amount. This means that even if John puts in only $10,000, he can still earn a substantial amount of money at the end, with a high interest rate.

 

And, this additional amount of money that John gets through smart investment can be used by him to upgrade his as well as his family’s lifestyle. With this, he can live well in his golden years and does not have to worry about his pension or savings. Moreover, he can also use this extra money towards his investments and thus increase his saved amount, in turn raising his returns.

 

Diversification of your investment portfolio

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By now, you know that investing in saving accounts can take a lot of time for you to accumulate a decent amount of money for your future. However, because of the reliability and security of banks and saving accounts, many people prefer this option over other investment choices. They are ready to earn a small rate of interest rather than risk their whole investment money. But, there are also a few people who would rather risk their principal savings just to get more interest rates and get more future value.

 

However, there is a way through which you can invest safely as well as get higher interest rates. You want to know how? Then, read on. This method is called investment diversification. If you are not familiar with this term, then let me tell you that investment diversification refers to investing your money in different types of investments.

 

This means that the investor manages his portfolio by holding different investments that have low associations with each other. Through investment diversification, the volatility as well as the risk of investment reduces. This is a smart risk management technique that combines a wide array of different investment options in order to potentially diminish your investment risk.

 

Let me explain this through an example. For instance, John has $15,000 to spare, which he wants to invest. Rather than putting all the $15,000 in his savings account, he can choose to diversify his investment profile. So, he puts $5,000 in his bank account and invests the remaining $10,000 in other investment options, such as Peer to Peer Lending, Binary Options, Forex, etc. Thus, he invests $3,000 in peer to peer lending, $3,000 in Binary Options, and $4,000 in Forex.

 

This way he can be sure that his $5,000 of savings is safe in his bank account as a solid bank investment. And, suppose if he loses the $4,000 in his Forex investment, he will not suffer a huge blow as he would have, had he invested all his savings in Forex. Besides, the reduction of risk, he will earn more as compared to his investment in just the savings account, as Peer to Peer Lending and Binary Options will offer him a much higher interest, when compared to what he receives on his savings account from the bank.

 

This shows you how diversification of your management portfolio can help to reduce your risk as well as give more returns on your investments. Even the most successful investors advice you to diversify your investments, as diversification is king. It will not only reduce unwanted risk from your investments, but will also contribute towards a winning portfolio.

 

And, a well-diversified portfolio does not essentially mean that you just have to buy more than one bond or stock, but it means to branch out into other investments areas, including Binary Options, Forex, etc. Also, these are the viable alternatives than the mainstream investment options of stocks, bonds, and mutual funds.

The four main investment options to diversify your investment portfolio

Since, investment diversification will require you to invest in more than one investment areas, we have brought forward a combination of four main investment options for you through which you can diversify your investment portfolio and earn higher returns with low risk. These four main investment areas are Savings Accounts, Peer to Peer Lending, Binary Options, and Forex.

 

Except the Savings Account option, all the other three are alternative investment areas that can prove to be very beneficial for your invest portfolio, once you know how all these work. However, if you have just started with your investing career, then you should steer clear of these investment options, as they are usually high reward and high risk securities that require some specialized knowledge and are more speculative than plain old bonds and stocks.

 

Nevertheless, they reward you with big profits. So, first you must know everything about these alternative investment areas, otherwise you can get yourself into trouble. Investment professionals and experts also agree that before you invest in these alternative investment areas, you must know them fully, with their advantages, disadvantages, risks involved, profits, etc. and then only you must choose to invest in them.

 

In order to help you out with the four main investment options, we have studied them in detail and jotted them down, so that potential investors can know everything about these four main investment options quickly.

For your convenience, we have assembled the popular investment options and further details about each of them

The four main investment options

 

Savings Account

  • Minimum amount of activity

    Varies from bank to bank. It can be as low as $25 or as high as $2,500.

  • Average yield

    Varies from bank to bank. Can be as low as 0.01% per annum or can be as high as 17% per annum.

  • Learning time management

    Atleast one monetary activity in six months.

  • Level of risk

    Low risk

P2P lending

  • Minimum amount of activity

    £10
    .

  • Average yield

    Depends on the market trends, generally 4.5%.
    .

  • Learning time management

    Requires monthly time management.

  • Level of risk

    Depends on the investor

Binary Options

  • Minimum amount of activity

    Depends on the investor
    .

  • Average yield

    Depends on the market trends, generally high returns with 70%.
    .

  • Learning time management

    Managed almost daily
    .

  • Level of risk

    High risk

Forex

  • Minimum amount of activity

    Depends on the investor
    .

  • Average yield

    Depends on the market trends.
    .
    .

  • Learning time management

    Managed almost daily
    .

  • Level of risk

    High risk


Savings Account

Savings Accounts are the first banking product that people use to save their money. They are generally offered by banks.

Advantages

  • Works for both short term as well as long term investment
  • Low investment risk
  • Comes with a guarantee that your investment will remain safe, without any losses
  • High liquidity
  • Fixed interest rate

Disadvantages

  • Low rate of interest
  • Minimum deposit required

You can invest your money in the savings accounts that offer high interest rates. These are the best savings accounts for you.

Peer to Peer Lending

Peer to peer lending is a form of investment, where you offer your investment money to different consumers who want loan and for this an interest rate is charged on the principal amount. The amount you offer to invest is split into chunks of smaller amounts and then lent to different borrowers. Every borrower pays back the capital with interest on your loans. You can either withdraw these repayments or recycle them into new loans.

Advantages

  • Works for both short term as well as long term investment
  • You can withdraw your payment anytime
  • You get high rate of interest
  • A small amount required to start the lending process
  • High liquidity

Disadvantages

  • Some level of risk involved
  • The interest you get depends on the market trends, thus no fixed interest rate
  • No guarantee of profits, as borrowers can fail to pay back your loan
  • Not safe as compared to savings accounts

There are many peer to peer lending websites on the internet, which work as tools and connect investors to qualified consumers who want loan and enable the investors to become a bank. Among these websites, the best one is Zopa, as it makes the whole peer to peer lending process easy and quick. You just have to open your account, choose your lending option between Zopa Access, Zopa Classic, and Zopa Plus and leave the rest on Zopa.

Binary Options

Binary options are a combination of different trading assets. In this, you make predictions whether the value of a particular company or any other underlying asset will increase or decrease. Unlike standard investment vehicles like bonds and stocks, you do not purchase a part of a firm in binary option trading. And, as a result you only end up with two possible outcomes in binary option trading, which is your either end up out of the money or in the money.

Advantages

  • Fast returns, as quick as 60 seconds
  • High returns
  • Works for both short term as well as long term investment
  • No minimum amount of deposit required

Disadvantages

  • High risk of loss, as if you predict wrong, you will lose all your investment
  • Daily time management required
  • Market regulation
  • No fixed returns, as everything depends on your prediction

24option.com is one of the best platforms for binary option trading, as it consists of different assets, including stocks, indices, currency pairs (forex), and commodities. It offers a user-friendly environment and immediate execution along with real-time results, so that every trader can take part in it.

Forex

Forex or FX in short stands for foreign exchange market. Trading in the foreign exchange currency is also one of the alternative forms of investing your money.

 

Advantages

  • Easy to understand as opposed to the stock market
  • Flexible, as no minimum amount of deposit required and no market regulation is there
  • 24*7 market operation
  • Different trading options with hundreds of currency pairs and options of spot trade and future agreement
  • High liquidity
  • Low transaction costs
  • No minimum amount required to invest your money

 

Disadvantages

  • High level of risk
  • No fixed returns, as returns depend on the value of currencies, that can change frequently
  • Lack of Transparency
  • Complex price determination process
  • High volatility

Indulge in forex trading through iForex, which is one of the best forex trading platforms.

The Bottom Line

If you are looking to increase your savings and want to invest them, then these four main investment options are the best. These are some out of the box investment areas, which go ignored most of the times, but work great when used smartly. You can diversify your investment portfolio in these four investment areas and minimize your investment risk as well as increase your returns. Of the four options, binary and forex guarantee higher returns with minimal risks, provided you know about them thoroughly before using them.

Plus, with the best innovative online platforms for each of these investment alternatives, you do not have to search which is the best place for investing your money, as we have already provided you with the best investment places.

So, what do you think is right for you?

Savings Account

  • Minimum amount of activity

    Varies from bank to bank. It can be as low as $25 or as high as $2,500.

  • Average yield

    Varies from bank to bank. Can be as low as 0.01% per annum or can be as high as 17% per annum.

  • Learning time management

    Atleast one monetary activity in six months.

  • Level of risk

    Low risk

P2P lending

  • Minimum amount of activity

    £10
    .

  • Average yield

    Depends on the market trends, generally 4.5%.
    .

  • Learning time management

    Requires monthly time management.

  • Level of risk

    Depends on the investor

Binary Options

  • Minimum amount of activity

    Depends on the investor
    .

  • Average yield

    Depends on the market trends, generally high returns with 70%.
    .

  • Learning time management

    Managed almost daily
    .

  • Level of risk

    High risk

Forex

  • Minimum amount of activity

    Depends on the investor
    .

  • Average yield

    Depends on the market trends.
    .
    .

  • Learning time management

    Managed almost daily
    .

  • Level of risk

    High risk

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