Everyone should be saving money for retirement, a â€œrainy dayâ€� emergency, or for things like putting the kids through college or starting their own business. The best ways to invest your money will have to do with what you are investing for, how long you have before you need the money, and how much risk you are willing to accept. And, the best ways to invest your money have to do with how much time and energy you can personally devote to your investments. You need to know where to invest money to get good returns over the years and the best place to invest money right now. Good investments for beginners should be easy to understand and low risk. How to invest money to make money fast should be a subject for investors with a lot of experience, as well as the ability to accept a lot of risk. Here are a few thoughts about the best ways to invest your money.
Where to Invest Money to Get Good Returns
Over the long term, the U.S. stock market has outperformed all other investment vehicles. When investing in stocks, the best approach is to start early, invest regularly, and choose a mix of safe stocks and growth stocks.
To get financial security is why people invest in stocks. Sometimes, people get lucky and pick just the right stock at the right time and get rich in a hurry. Much more commonly, people succeed by determining intrinsic stock value when purchasing and using dividend reinvestment plans to reduce the cost of buying new shares and to accelerate the growth of their investments.
To the extent that you need your money earlier, rather than later, you may choose stocks that have greater growth potential but these are commonly not good investments for beginners because it is all too easy to pick a stock that looks promising but fizzles out and takes your hard-earned money with it.
Safe Places to Invest Your Money
The first place that people should consider for an investment is their own home. Over the years, you will pay less on mortgage payments than for rent. And, the mortgage interest deduction on your taxes is a sweetheart deal that no investor should pass on. Then, the question is how to invest without losing any money. As we note in our article, there are four ways to invest and protect your investment capital.
- Bank deposits that have Federal Deposit Insurance
- US Treasury Bills, Notes, and Bonds held to maturity
- Investment Grade AAA and AA Bonds held to maturity
- Long term investing with a focus on intrinsic value
The first three best ways to invest your money, if you simply want to reduce risk to a minimum, are ones with lower rates of return than the stock market but the security of essentially holding cash. To make this work you need to hold your bank CDs, Treasuries, and corporate bonds to maturity or only sell when interest rates fall and you can make a profit on selling a bond or treasury. This is one of the best ways to invest your money if you want minimum risk and especially if you will need the money soon and donâ€™t want to take the chance that the stock market will correct at the worst time for you.
The fourth of our best ways to invest your money is low-risk over the long term. You will invest in stocks that have been paying dividends for over a century and other very stable companies that provide a steady appreciation in value combined with maximum security. These are investments that let you sleep soundly at night
ETFs and Low Maintenance Investing
There are folks who have made millions and millions of dollars in the stock market by carefully researching their investments, precisely timing their purchases, and paying attention to the market every hour and every day. And, then there are the rest of us who have a regular job to go to and do not have all day to research stocks with fundamental analysis tools to find the best picks.
One of the best ways to invest your money in the stock market is to invest in an ETF (exchange traded fund) that tracks a broad range of the U.S. stock market such as a fund that tracks the S&P 500. Many of these funds have outperformed more closely managed investment funds in recent years. These are very good investments for beginners because they tend to do well and are diversified across the wide range of stocks. There is always a risk that the entire market will crash (and then return as it always does) but there is no risk that a single stock will tank and take down your investment with it such as happened recently with Kraft Heinz.
How to Invest Money to Make Money Fast
The best ways to invest your money are those that reliably offer the best return with the lowest risk. That having been said, there are times when a little research, a little foresight, and a bit of patience follow by prompt and well-timed action can pay off handsomely.
Beware of â€œinvesting tips.â€� All too often the person giving the tip wants you to invest in a penny stock to drive the price up so that they can sell at a profit before the stock falls again. If you think that a tip might be valid you need to analyze the fundamentals of the company and have a good sense of the technicals that drive day by day stock movement. This can be done, but requires attention to detail. Here is a personal example from years ago. It shows how an investor can pay attention to a stock, understand why it is going up or down, and profit by investing at just the right time.
Xerox Rise and Fall
Xerox developed the first plain paper copier in 1959. The Xerox 914 was the most successful single product ever sold at that time. Xerox dominated the photocopier market in the 1960s until the mid-1970s. They had essentially 100% of the photocopier market and were the subject of an anti-trust suit which they lost in 1975. They were forced to license all of their patents to competitors, mostly Japanese. By 1979 Xerox had 14% of the photocopier market and their Japanese competitors were selling copiers in the USA for less than it cost Xerox to produce them. At the same time, Xerox management decided to diversify into insurance. They took huge losses when a hurricane hit the Gulf Coast.
Xerox Recovery and the Take-over Bid
In the 1980s Xerox cut costs, reduced its insurance business profile, wrote off losses, and improved its product line. It started making money again and its stock price started to rise. At this time a group of â€œtake-overâ€� artists started buying up Xerox stock and buying options contracts on the stock. They drove the price up a bit and were close to being able to take over the company, which they would have broken up and walked away with a tidy profit.
But, the â€œtake-overâ€� guys were too highly leveraged. They ran out of money and had to start selling their shares. Xerox, had climbed to $60 a share with better management and paying off its hurricane losses. When the â€œtake-overâ€� guys ran out of money and started selling, the price of Xerox fell to $30 a share within just one trading session.
Best Ways to Invest Your Money when You Have Done Your Homework
Those who had been following the Xerox story and had invested in their recovery understood what had happened and that the stock would go back to its $60 range once the â€œtake-overâ€� guys were done selling and went away. So, some of us bought Xerox at $30 a share the first thing the next morning. By the next day, the price was back to $60 a share.
The point of this narrative is that you can make money in a hurry in the stock market but you typically need to do your homework first and then you need to stay in touch with the market in order to time your investment correctly in order to turn your research and insights into a profit. This really is one of the best ways to invest your money, providing that you have the time, energy, patience, and a knack for timing the market.