If you want to make money for your future, there are all sorts of ways to do it. There are financial tools that banks and similar institutions offer you, or you might opt for something a little less stable but potentially more profitable. It all depends on whether you’re okay with a bit of risk or whether you prefer less perilous investments.
Let’s look at a few of the ways you can increase your money, and we’ll talk about some negatives and positives that go along with each one.
Stocks
There’s little doubt that the stock market is where you can make a fortune or lose one in record time. What’s interesting about stocks is that they’re a concept, but never something you can see or hold in your hand. It’s not like investing in used CNC machines or some other physical commodity.
If you get a hot tip, you might sink your money into that one stock and hope that it skyrockets within the following days or weeks. Some people knew enough to put a lot of money into Apple or Amazon right when they were starting out.
If you succeed in the market, you buy cheap and sell when the stock is at an all-time high. The drawback is obvious, though. If your calculations were incorrect, the bottom might drop out of a particular commodity, or the company you were so high on might suddenly collapse. Then, you only have a fraction of the money you put in.
Mutual Funds
Mutual funds are large collections of stocks and other commodities that you buy into as a group. A financial expert runs the mutual fund and decides what stocks, bonds, and so forth will be a part of it. You are pooling your money along with other interested investors.
Probably the best thing about mutual funds is that they are inherently diversified. That means if one of the securities contained therein doesn’t do as well, the others will prop it up. History shows that generally, mutual funds go up over time.
The biggest drawback is that a mutual fund won’t help you much if you need more money quickly. They grow slowly, and if you need the cash you put into it six months down the line, it might have lost a little rather than gained anything. If you’re able to put money in one that you know you’ll only take out again in 20 or 30 years, this may be a suitable choice.
CDs
CDs are one of the safest, most stable monetary tools in which you can put your money. Banks like it when you buy CDs from them because you are asserting when you do that they can hold onto that money for the period before the CDs matures. You might get a six-month CD, or you could get a 1-year one, a 2-year one, or considerably longer.
The longer of a CD period you get, the better the interest rate the bank will give you. One drawback is that you need to put a significant chunk into a CD to make it worth your while. You will probably need at least a few thousand dollars.
At the same time, you should realize that you cannot take any money out of the CD without paying the penalty unless you happened to get a penalty-free CD. They do exist, but you don’t often get the higher interest rates on them. Also, much like a mutual fund, if you want to get as much from your CD as you can, you need to be patient and let it sit there.
IRAs
IRAs are retirement accounts. Everyone should open an IRA at some point, particularly if your work does not offer you a 401K. You should attempt to put money in your IRA periodically. You might put in a set amount from each paycheck.
You can get a Roth IRA, where the federal government taxes the money as you put it in, or a non-Roth IRA, where the government will not take their cut until you reach retirement age. Most people prefer the Roth IRA because when they retire, and they want to use that money, they’ll get all of it at that point since the government already taxed them the appropriate amount.
You might decide to use not one of these tools but several of them. That’s how you diversify your portfolio, which any financial advisor will tell you is a smart idea.
