How to Invest Your Money in Ways That Work Best for You

According to Money Under 30, the fund individuals leave in their savings accounts lose about 2% of their value annually. This is because inflation rates are higher than savings accounts’ interest rates. Savings accounts are no longer as profitable as they once were. So, it is time for investors to find alternative financial investments.

Why Invest Your Money?

Individuals need to grow their savings today to protect their future lives. Storing money in a savings account is the most foolproof way for individuals to save their money. Yet, the money that sits in a bank account decreases in value over time. However, other investments increase in value over time. Individuals can keep their money safe in insured bank accounts. But, it is not a viable way for individuals to make money or establish comfortable financial futures. 

Ways to Invest Your Money

Bonds tend to be a low-risk way for individuals to invest any extra income. However, this depends on which large company or government entity borrows money from an individual’s bond. Investors are unlikely to make a significant profit from bond investments. Bonds are one of the best investment options available to risk-averse individuals.

The stock market crash of 1929 likely traumatized early stock investors. But the stock market investments perform well long-term today. Individuals have the freedom to invest in a plethora of stocks using as much money they please. Stock investments are riskier than bonds, but they are more flexible than ever before. Individuals no longer have to buy bonds in whole numbers (e.g., one, two, three). Instead, they can buy a percentage of a stock (e.g., 10%, 20%, 50%), making smaller investments possible.

Real estate investments have highly variable risk and return rates. The profitability of a home, apartment, or other building is context-dependent. The success of real estate investments changes based on location, condition, and overall increased or decreased value of a property. However, it costs thousands of dollars to get a share of a property in the U.S., making real estate investments relatively expensive. Even if an individual can afford to invest alone, they must make more money from rent than they pay for their mortgage, taxes, upkeep, and other fees in order to profit. So, keep rental properties for a minimum of two or three decades.

Cryptocurrency is currently one of the most high-risk and high-return investments available. Investments in cryptocurrency can grow or diminish exponentially in a short time frame. This makes such investments a lousy idea for the risk-averse population of investors. The crypto market constantly shifts. It hits all-time highs and new lows on almost a monthly basis. In order to profit, investors must be knowledgeable enough to buy currency at a low price before quickly reselling at a much higher price. Otherwise, investors must maintain their investments for years with the hope that they will one day see a profit.

Microlending, an investment option available via online companies such as Lendee, allows lenders to invest their money quickly with limited risk.  Microloan default rates are low and, through Lendee, lenders can set fees to counteract the potential financial impact of a borrower defaulting. Because investors can create minimum requirements, they can limit the number of borrowers who qualify for their microloan funding. Additionally, lenders can choose how much money to invest and engage in the supply of microloans with multiple borrowers via peer-to-peer lending. Prior to approving microloan requests, lenders have the ability to look at the Lendee score of potential borrowers. This score is calculated using:

• Borrowers’ credit scores
• Repayment histories
• Spending information, and
• Applications

This provides financial accuracy. Based on a borrower’s Lendee score, lenders have the ability to set the fees and conditions of a microloan and decide who gets their money. 

How to Determine Which Investment Option Works Best

When comparing investment opportunities, individuals should ask themselves a few questions. For instance:

• How active a role do I want to play in investing?
• What’s my risk tolerance?
• How much money do I want to invest?
• What amount of money can I actually afford to spare?
• How long do I want to maintain my investments?

Often, individuals prefer to passively invest their funds, spending as little time and money as possible to get the most significant returns. Also, individuals generally do not have a lot of money waiting to be invested, especially at the start of their investing careers. Some investors do not mind short-term dips in the market as long as they are able to profit in the long run. They are aware of market fluctuations and keep cash on hand to invest during market recessions so they can take advantage of good financial deals. Such individuals might prefer to invest in stocks or alternative investments like cryptocurrency. Other investors prefer to avoid risky investments, in which case bonds would provide a more comfortable way to invest. Most individuals fall somewhere between, wanting to profit by taking the smallest risk possible. For these investors, microloans may represent the best opportunity.

Tips for Investing

There are a few general rules that should be remembered by investors to ensure long-term financial stability and protection. For instance, it is popularly known that individuals should diversify their investments. In other words, it is beneficial to put money into different types of assets such as:

• Stocks
• Bonds
• Cryptocurrencies
• Microlending services

Mutual funds simplify diversification by investing money into multiple types of investments. Investors don’t have to choose which investments appeal to them. Doing this is essential to protect individuals so that even if one company’s stock goes down or the market crashes, their monetary investments will not be completely lost.

Moreover, individuals should continually invest in their retirement funds, refraining from taking out any funds before turning 60-years-old or retiring from work permanently. Investing in an IRA or 401(k) plan will allow them to continue living comfortably long after they stop working. However, withdrawing any amount from the above accounts would require an individual to pay taxes and a penalty fee of about 10% on the money taken out. 

Financial advisors suggest making long-term investments. Longer investment terms tend to result in higher dividends. Therefore, individuals should not invest money that they may need to use in the next five years. While some investments hold funds that can be liquidated much more quickly than others, such as 401(k)s, individuals must let their money sit for as long as possible in order to get the best returns. For reference, it has been said that investors should only use a maximum of 5% to 10% of their total income to finance frequently-flipped investments to protect their long-term financial livelihood.

Lastly, do-it-yourself (DIY) investing usually proves to be the best option available to individuals who are interested in investing. This is because most individuals have a fairly small amount of money to invest and few investments to track. As a result, these individuals don’t have to obtain the pricey help of a financial advisor or platform.

Endnote

Check out the Lendee website today to learn more about how to invest your hard-earned money in ways that work best for you!