5 Places to Invest Your Savings and Top Places to Avoid

by Darwin on January 27, 2020

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Saving up is great, but investing in your savings is even better. Investing is a great way to grow your wealth and there are different ways of investing, some of which are very safe while others have little risks. Either way, investing in your savings is a long term plan that can help you multiply your income. That said, below are 5 great places you can consider investing your savings.

Corporate Bond Funds

These kinds of bonds are short-term, and are provided by corporations for small investors. It is one of the ways that they raise money, and the bonds usually have a maturity of between 1 year to 5 years. Since they are short-term, they are less likely to experience interest rate fluctuations, making them a perfect investment tool. In addition, corporate bond funds provide cash flow and are great if you want to lower your portfolio risk. Another advantage of investing in corporate bond funds is that they are liquid, so they allow you to purchase and even sell your shares any business day. 

Mutual Funds

Mutual funds allow you to put your savings in a pool of investment with a diversified portfolio, which helps to spread the risks of investing in one place. There are money managers who operate the mutual funds, and all you need to do is find a good one and your money will be safe. The professional management of the invested money makes mutual funds one of the best ways to invest savings. Just make sure to do some research on what they entail to avoid future frustrations. 

Hedge Funds

Hedge funds work in a similar way as mutual funds but there is a set minimum amount for each investment made. These investments can either be unregulated or regulated in exotic destinations. Hedge funds also offer aggressive strategies that have high returns when compared to other investment vehicles. A hedge fund would also be a good investment option if you own assets that you want to invest in. 

Passive Investment Portfolio

While a lot of investment options have short-term advantages, passive investment portfolios are long-term. With a passive investment portfolio, the investment amounts are kept minimum while the returns are maximized over a long period of time. These investments are not affected by other market stocks and commodities, hence there is minimal risk in investing in them. They are also low expense investments with high predictability since they are transparent, such that investors can always know the funds holding the whole time. 

Real Estate

Real estate is yet another great place to invest on your savings. The value of real estate appreciates, and since it is mostly tangible, it makes it an improvable asset. So, damages and repairs can always be made to increase the worth of a building. There are many ways to invest in real estate, and another benefit is that it can be leveraged. 

Top Places to Avoid

While investing in your savings is important, there are some places where you shouldn’t be putting your savings. A good investment should make you more money than you invested in, and if you are able to hedge the risk of investing in it, the better. Below are top places you should avoid investing your savings.

Insurance 

A lot of insurance agents tend to sell life insurance products that come with an investment portion. What these products claim is to have the ability to take a portion of our premium and put it towards an investment that you can cash out later if need be. The problem with these policies is that you end paying mostly for fees and investments that aren’t getting the best returns. Most agents preach to buy pure protection coverage and invest the savings you would get on a premium. This is because whole life policies can be as much as 10 times the cost of a term life policy. 

Tax Shelters

Tax law is complicated, and most wealthy people only benefit since they can afford to pay millions for tax advice and defense, in turn saving more millions in taxes. Tax shelters also don’t give investors control, which is important in any kind of investment. 

Binary Options

Binary options work the same way as sports betting such that you receive a predetermined price if an initial choice you made is correct, or lose all your money if it is wrong. Binary options are high risk since it can be very difficult to predict short-term price movements correctly. Withdrawing money can also be problematic, and binary options are generally unsupervised and unregulated. 

Penny Stocks

Penny stocks are usually common stocks that trade for less than $5. Penny stocks are highly illiquid and have minimum standards set for investors interested in trading. They are a risky investment, and they can be easily manipulated, making them a bad investment option.

The worst that could happen is losing all your savings in an investment you had not thought through. Before putting all your savings in an investment, make sure you understand it well and all the risks involved, if any. 

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