Where
to Invest?
The answer to your question really depends on how
much money you plan to invest, the return you expect on your money and the
amount of risk you want to assume. Where to invest depends entirely on these
factors.
Remember, the more risk you take, the higher the
potential return. Likewise, a lower level of risk, will also give the investor
a lower return. For example, if you are looking for safety in an investment,
U.S. Treasury Bonds or T-Bills offer the investor a guaranteed return, although
that return is currently quite low due to the low interest rate environment in
the United States.
After Treasuries, money market CDs or certificates
of deposit offered by many financial institutions also offer a high level of
safety, but a low return. The next level of risk would be investing in
municipal or corporate bonds.
Corporations and municipalities offer a higher rate
of interest for your money than U.S. Treasuries, but carry a slightly higher
level of risk depending on the corporation or city issuing the bonds. A blue
chip company or large city will tend to have bonds with lower yields but also
with lower risk, while a start-up company or a small municipality will tend to
offer bonds with significantly higher rates of return.
Descending the ladder of risk now takes us to
corporate stocks. Stocks represent ownership in a corporation. Each share
represents just that, a share in the profits of that company. Corporations
typically sell investors part of their company through a stock offering in
order to raise capital to expand, invest in infrastructure or develop new
products.
Owning stock has been a traditional investment for
many people and can also be done by investing in mutual funds. Nevertheless,
many investments with higher levels of risk are available, if that is your
investment criteria.