Investing your money smartly may be the easiest way to grow your wealth over the long term. While you are unlikely to become rich overnight by getting involved in the stock market, you can watch your money grow over a number of years.
At the same time, many of the richest people in the world got to where they are because they purchased a large block of stocks and then had the company increase in value. Whether you want to start small and work your way up or make a big splash right away, there is certainly money to be made through investments.
Certificates of Deposit
Investing in a certificate of deposit, or CD, is a great way to grow your money. This savings tool locks your money in at a set interest rate for a predetermined amount of time. The interest rate is usually higher than a traditional savings account, but you must remember that you will not have access to this money. This is a long term investment, so do not expect to see any significant growth unless you are able to keep your money in the account for a significant period.
If you have a large amount of money to invest, money markets might be your best bet. These markets are short-term debt securities that are usually offered by governments, banks or large corporations. In essence, you are funding the debt of these countries or organizations by purchasing market securities. Many investors like money markets because they are very low risk. The problem is that they offer significantly lower returns than other investment opportunities, so you will have to invest a great deal of money to gain significant returns.
Making money in the stock market is about more than buying a stock at a low price and selling it at a high price, as many stocks pay out dividends at the end of the year. If you are lucky enough to own a stock that pays out, you will not have to sell it to receive a return on your investment. Not all stocks pay dividends; it depends on the organization’s structure. Be careful: it is important that you research a company before purchasing stock. Don’t buy based on the expected dividends, as some companies artificially inflate this amount to attract investors.
Choosing a Broker
Before getting involved in the market, you will need a stock broker. There are several different categories of brokers to choose from, including discount brokers, traditional brokers and money managers.
The type that you should choose depends on the type of help that you need. A basic discount broker will not provide you with any assistance and will simply make trades for you. It may be possible to receive some help for an added fee. A full service traditional broker acts as an interface meter by providing you with stock picks and an investment plan, while a money manager will take responsibility for your entire portfolio.
By Guest Blogger, Alicia Lawrence! Thank you!