Pros and Cons of Investments
People invest money for one reason – profit! If you’re about to put some of your money into an investment then it is a good idea to find the investments that will give you the best returns. Let’s look at the most popular and accessible investment vehicles available right now and discuss the pros and cons of each.
Real estate was once a great investment. You could purchase a property with virtually no money down, pay only the interest on the loan and have the property rented out, bringing in a nice income within the space of a couple of months. On top of that, the value of your property was increasing at quite a steady pace.
This is no longer an option for most people and it is not as easy as it once was. You can no longer get a mortgage without having put up at least the first money. This means you would not generate a return on your investment for a good few years. Also, property values are not even increasing with the rate of inflation at the moment. But it is a good variant to keep money without loses.
Mutual funds can produce very good returns and give you the option to “join forces with other investors”. With the combined capital of a mutual fund, you can have access to investments that have a high minimum investment amount.
As mutual funds are professionally managed, they require little work on your part. You don’t need extensive knowledge on all the investment types that make up the mutual fund although this kind of information does help when initially choosing your mutual fund management company. This professional management comes at a price and with any mutual fund, there is always involving costs. If the mutual fund doesn’t perform to your expectations then these costs can quickly eat away any profit.
Investing in the stock market, behind regular saving is probably the most popular form of investing. If you know what you are doing and how to research the companies on the stock exchange then you can achieve amazing returns. However, if you are new to the stock market then investing in blue-chip companies and companies that have long and established successful history are your best bet.
You may not see the short-term gains that seasoned investors achieve but you have more chances of a successful long-term investment. Find yourself a good full-service broker that you can trust for advice while you are starting out. As you gain more experience you can then use a discount broker to reduce your costs.
Across the whole stock market, the average return has been around eight to ten percent a year (over the last 5 years). In the same period gold has returned around twenty percent on average each year. That is a very good return even after inflation adjustment and paying capital gains tax you’re still left with a bigger gain than the stock market average. The benefit of investing in gold is also that you don’t need to know all the information you need to invest in the stock market successfully.
Don’t forget to use investment calculator. Luck plays a part in investing. But with the right knowledge, the amount of luck can be brought under control.