There are so many different ways to invest your money. But just which investment strategy is right for you? For those who are looking to grow their money, here are a few questions that could help you to work out the best investment strategy.
How much money do you have to invest?
Some investments require you to put down a lot of money upfront. For example, property investment typically requires investing thousands for a down payment on a property (not to mention improvements and other buying costs).
Other investments don’t require much money at all. Nowadays you can buy fractional shares of companies for as little as $1. There are also collectibles that you can buy for a few dollars.
Of course, the less you invest, the smaller your return will be. A $10 investment that doubles in a few years is only $20. A $1000 investment that doubles in a few years is $2000. In other words, it’s better to invest more if you have it.
How quickly do you want to grow your money?
With some investments, you can wait years to make any substantial return. Others can yield high returns within a few months. For example, savings accounts typically produce very low returns – perhaps not even a dollar per year. Some cryptocurrencies have meanwhile been known to double in value within a year – potentially making you hundreds or thousands in a few months.
It’s important to consider your investment goals when choosing an investment strategy. Are you saving up for a long-term goal such as retirement? Or are you looking to grow your money quickly for a short-term goal? Savings, value stocks and buy-to-let properties may be better for long-term goals, whereas cryptocurrencies, high growth stocks and property flipping may be better suited for short-term goals.
How much money are you willing to risk?
Generally speaking, the quicker you want to grow your money, the more risky the investment strategies are likely to be. Cryptocurrencies for example are extremely volatile, and while they can skyrocket in value in a short period of time, they can also plummet dramatically. When putting money into these types of investments, it’s important to not invest more than you’re prepared to lose. You typically have to monitor these investments more regularly so that you can quickly pull out if things turn south. Such investments can also benefit from a lot of research and even professional help in some cases in order to reduce the risk (as is often the case with flipping property).
Don’t want to risk losing your money? Slower and more steady investment strategies are typically more secure. The most secure investment strategy is to put your money in a high-interest bank account – there’s almost no risk of losing your money here, and you’re guaranteed a return (even if it is very small). Value stocks and buy-to-let property are a little more risky, but still fairly safe options compared to many other investments like crypto and high growth stocks.
Do you need to be able to constantly access the money?
Once you’ve invested the money, do you still need to be able to pull it out at any moment? With some investments, you can easily withdraw your money when necessary. For example, there’s usually nothing to stop you from selling a stock or taking money out of a savings account (although there may be penalties in some cases).
With other investments you may be locked in for a certain period. Examples include Certificates of Deposit (CDs) and savings bonds. Such investments can have their benefits – they can stop you from dipping into your money for other purposes so that you’re guaranteed to reach your investment goal. Of course, the downside is that if you fall on hard times and need the money in an emergency, you won’t be able to access it.
Does your investment need to be tangible?
Some people don’t like the idea of investing in things they cannot touch. Tangible investments like collectibles, real estate and gold can give investors a sense of ownership. There’s also very little risk of losing all your money – something physical will always be worth something.
Investments that aren’t tangible include stocks, cryptocurrencies and NFTs. These are better suited to those that do not mind owning something physical. Generally speaking, you need to be a bit more digitally savvy to get involved in these investments.
Are you looking for a hands-on investment?
Some investments require a lot of hands-on maintenance and may even require you to put in regular labor. Starting a business is a form of investment that requires a lot of hands-on work. Other investments like renting out property are less hands-on but still require a lot of involvement such as carrying out property repairs and finding new tenants when old ones decide to move out.
Other investments like stocks and savings accounts contrastingly require little to no hands-on involvement. Once you’ve chosen your savings account or bought your stock, you can sit back and watch your money grow without any involvement. These types of investments are best suited to those who are too busy to get hands-on. Of course, hands-on investments may be more rewarding for some people.
Are ethics important when investing?
Some people care deeply about the social or environmental effects that their investment will have. As a result, such people may avoid certain investments that have a harmful impact on society or the environment. Impact investments have become a lot more popular in recent years – these are investments that have a positive impact on society or the environment (such as investing in a wind farm). For some people, this impact may be more important than the financial gain itself.
Of course, if ethics is not a concern to you, it doesn’t matter where you put your money. Most people will have certain ethical boundaries – it’s worth establishing these first before looking for places to invest.
Can you invest in passions and interests?
Some of the best things to invest in are things that you are already passionate and interested about. For example, if you love music, investing in vinyl could make sense – it is something you’ll enjoy researching into and you can even get personal enjoyment out of your vinyl by listening to them.
In fact, collectibles are a great option for people with deep passions and interests – things like art, sports memorabilia, trading cards and antiques can bring personal enjoyment as well as being a source of investment. Just make sure that you don’t grow too attached to the point that you cannot sell these collectibles when you need to.
Following your passions also applies to investments like stocks. It’s better to invest in companies that you know and love than to invest in companies you aren’t familiar with – you’re more likely to follow news about these companies and will know exactly when to put in more money or pull out.