If you want to grow your money then you should consider investing it. But with lots of different types of investments available, which type of investment do you choose? In this post we’ll be looking at 10 investment ideas, their growth potential and some of the risks involved.
What Are Some Of The Different Types Of Investments?
View this list of 10 investment ideas below for inspiration.
High Yield Savings
First on the list of investment ideas is a simple one most of us will be familiar with – cash savings. High yield savings are a type of savings account that usually offer much higher interest rates than standard savings accounts. They tend to be operated more by online banks rather than traditional banking providers.
Cash savings might not seem like one of the greatest investment ideas. It won’t offer you huge potential returns like other asset classes such as shares or cryptocurrency. But cash does offer security that other investments don’t.
That’s why it’s often a good idea to diversify your investments between cash and other assets. By holding cash in a high yield account you receive a better rate of interest than most other account types. The cash you deposit gets compounded – where the interest is applied to your original deposit and the interest earned. This can easily start to accumulate over time.
There are other savings options such as money market or certificate of deposit accounts. Some of the top savings account providers include; Axos, Quontic, Aspiration and CIT Bank. Learn more in this post about the different types of savings accounts.
Shares are one of the most common types of investment ideas for many people. They are simply a unit of equity ownership of a business. They can be privately held or traded publicly on a stock exchange.
There are two main ways of making a return on your investment with shares; income and capital growth.
Income may be received in the form of dividends. You can either keep the cash or re-invest it into buying more shares. By continuing to re-invest dividends over time your investment can grow substantially. This is known as dividend compounding – where you can start to earn dividends on dividends. Not all companies pay dividends.
Capital growth is the total growth of your original invested capital and will come from rising share prices over time.
Shares are often classified into different categories by investors. These group similar types of stocks together according to certain characteristics they have such as; growth, value or defensive.
Every investment involves some level of risk. With shares there is a risk that the companies you invest in don’t perform well or could even go bust. That’s why it’s usually a good idea to diversify by holding multiple stocks rather than one single stock. If one business were to fail, the financial blow is cushioned by the rest of your shares.
Shares can be volatile in the short term. But over longer timelines shares usually offer some of the greatest returns of any investment asset class.
Where To Trade Shares
There are some great social trading apps like Public and eToro. These apps offer plenty of commission free share trading plus access to other assets like cryptocurrency. So you can put these investment ideas into action.
Funds pool together investors money and hold a diversified range of investments that are managed by a professional. They are a good option to easily diversify your investments and save time researching individual shares.
Mutual funds are bought and sold in units directly through the fund manager and are priced daily. An unlimited number of shares can be issued in an open fund.
There are a wide variety of funds that all have different aims and objectives. They may hold anything from just one asset type such as shares or bonds or a mixture of different assets. Funds are a good way of gaining exposure to a specialist area that otherwise wouldn’t be viable to an individual investor.
Active And Passive Funds
Passive or index funds, aim to match the performance of an index such as the S&P 500. These types of funds usually invest in all the shares that make up that index. They require less management than other funds so management fees are usually lower. This makes them a great low cost and convenient option for investors.
The other type of fund is known as an active fund. This is because they are actively managed by a fund manager who will make investment decisions on the fund. They will conduct analysis and make trades as necessary. Active funds will aim to outperform an index rather than just replicate it. Due to the extra work involved, active funds usually have higher charges than passive funds.
ETFs are Exchange Traded Funds. As the name suggests they are a type of fund that is traded on an exchange just like shares.
Most ETFs work like an index fund, aiming to track the performance of an index, sector or asset. Although there are some actively managed ETFs that aim to beat the market.
There are two ways this is done – physical or synthetic ETFs. Physical ETFs own the underlying assets. Synthetic ETFs use derivatives to replicate the movement of the underlying holdings. Shareholders in ETFs only hold a share of the ETF and not a share of the underlying assets.
ETFs can track a very wide range of indices, sectors or investment themes. They are a good way to gain exposure to asset types that otherwise cannot be purchased such as certain commodities. E.g corn, coffee, oil, livestock etc. They are also good options for currency hedging.
The next of our investment ideas is a true alternative investment – alcohol, in particular whisky. You are probably familiar with whisky as a drink. But it is also a commodity to be used as an investment.
There are two main ways of investing in whisky – bottled whisky or maturing barrelled whisky. Old and rare bottles of whisky can be bought and sold. This presents the obvious issues of storage and insurance. Plus you need to be an expert in the field to know what is going to increase in value.
The alternative option is to invest directly into maturing barrelled whisky. This is the raw product used in the production of bottled whisky. It takes many years for whisky to mature in the barrel before a company can blend and bottle it. The longer it matures the better.
How To Invest In Whisky
Until recently this type of investment was only really available to a select few distillery companies. But now thanks to companies like WhiskInvestDirect, this alternative investment class is easily accessible to private investors.
The online trading platform allows investors to purchase maturing whisky in the barrel. This whisky is then purchased by the top bottling companies to use in their products. The whisky is securely stored in bonded warehouses, keeping it free of tax.
This is a good option for anybody with a long term investing horizon that wants to diversify their portfolios. Generally speaking, the rarer the whisky and the longer it is held for the more valuable it will be. Whisky is among the best alternative investment ideas for your portfolio.
Real Estate Rental Income – REITs
Real estate is an alternative way to earn an income from rents. The trouble with investment real estate is that it can be costly and difficult to enter for many individuals. However, REITs are a great alternative to traditional property investing. They could provide a good source of passive income to an investor.
REIT stands for real estate investment trust. It is a type of company that owns or operates income producing real estate.
A REIT can be invested in different types of property and land including both residential and commercial real estate. This can include houses, offices, warehouses, data centres, shopping malls and much more. This gives ordinary real estate investors the opportunity to own assets that would ordinarily not be easily accessible to them.
Benefits of REITs over traditional real estate are reliable regular incomes, good diversification and ease of buying and selling. Invest in REITs with Realty Mogul, the specialist online marketplace for investing in real estate assets.
Read our post for more information on how to earn passive real estate income with REITs.
Bonds are a type of fixed income debt security. The bond holder effectively loans money to the bond issuer. The bond issuer pays the holder an interest payment and promises to repay the loan in full by a set date. Bonds can be issued by companies and governments as a way to raise finance for future projects.
Interest rates on bonds vary depending on the quality of the issuer, determined by it’s credit rating. Those that are more likely to repay on time have lower interest than those that are less likely to repay on time.
Bonds are different to stocks in that a bondholder has no ownership rights of the issuing company. This means if a company is performing well, you will not benefit from this growth. On the flip side, when the company isn’t performing so well, as long as it can meet it’s repayment obligations then you will be unaffected.
Bonds can be bought and sold individually like shares. Although it is often preferable to invest in a specialist bond mutual fund or ETF. This way you get good diversification of bonds and regular income payments. If one or more issuers fail to repay then the diversity of the funds will limit the negative impact.
Cryptocurrency is among the most popular investment ideas at the present time. It is a type of digital or virtual decentralized currency. This means it is issued and held outside of government or central bank control.
Blockchain is the technology behind most cryptocurrencies such as Bitcoin. This is a public ledger system which adds to a large chain of confirmed transactions. Which is where the name blockchain originated from. With blockchain technology after verifying a financial transaction you cannot change it. It creates immutable records which is excellent for security. These are some of the reasons why it is becoming more popular.
Cryptocurrency is a relatively new type of asset and therefore presents both risks and opportunities. Some think it will prove to be revolutionary whereas others see it as a short lived fad. It can be quite volatile with large swings in price both up and down in a short period of time. So whilst it does offer good opportunity for fast growth it does also have the risk of large losses.
You may find this post useful covering some of the ways to get free cryptocurrency.
Peer-To-Peer (P2P) Lending
Peer to peer lending is sometimes known as P2P lending. It is the act of lending money to borrowers through an online finance platform. In return the lender receives interest on the money they have loaned. Interest income may be taken as cash or re-invested into more loans to allow returns to compound.
Interest earned through P2P lending will usually be much higher than interest rates available on cash savings accounts. But there is less growth potential than other assets like shares or cryptocurrencies. You may have to lock up your money for longer periods of time to earn the best interest rates.
It’s important to note that your money is used to fund loans. There is a risk that the borrower could default on the loan and therefore your capital is at risk. Although most P2P platforms usually offer some form of protection against this through provision funds.
P2P loans are probably not something you should be investing all of your cash into. But it could help to diversify your portfolio.
How To Invest In P2P Loans
Whether you are a new or experienced investor, Lenme make it easy to invest in loans and lend on your terms. Machine learning is used to identify the likelihood of borrowers defaulting. They will help guide you toward the most suitable and profitable loans.
For those more experienced investors that prefer to make their own analysis, all the data is provided for you. This includes the borrower’s credit reports, income and payment history. So you can make an informed choice.
With no minimum investment, Lenme is a great place to begin investing in peer to peer lending. For further information visit Lenme.
The final of our investment ideas is gold bullion. It is possible to invest in many precious and non-precious metals. But gold is seen by many as a preserver of wealth and the ultimate safe haven. It is usually used to diversify a portfolio to protect against financial turmoil.
There are many ways to invest in gold including; physical bullion, coins and jewellery, gold mining company shares, mutual funds and ETFs.
Owning physical gold presents issues with secure storage and insurance costs. Investing in the shares of gold mining companies means you are reliant on the success of that company. And you don’t actual own any gold. Trading fees must also be taking into account when investing in shares, funds and ETFs.
If you wish to trade gold, one of the easiest and lowest cost options is through the BullionVault platform. It is the world’s largest online gold investment service managing over $3 billion of bullion. This is an online platform that allows private investors to trade gold, silver and platinum bullion.
When you buy gold on BullionVault, you are purchasing physical gold. But instead of receiving it, you can have it safely stored automatically in one of 5 worldwide vaults. The BullionVault platform allows you to own physical bullion but without the complexities and costs of storing it. You always have the option of withdrawing your bars if you wish.
Trading commissions can be as low as 0.05% with no minimum trade size.
Investment Ideas Conclusion
Anybody looking to make more of their money would be wise to invest it for future growth. There are a multitude of investment ideas that cover every investor’s appetite to risk and reward.
For those that want a stable return on their money with low risks then cash and bonds are the most suitable investment types. Cash can be an investment as long is it is held in high yielding savings accounts.
For those with a higher appetite for risk and want to see a greater return on their money then there are many other investment ideas. From traditional stocks and mutual funds to more alternative assets like real estate and cryptocurrencies. They do come with some risk but the potential rewards are far greater.
Whatever your investment preferences are it’s usually good practice to hold a portfolio made up of a diverse range of assets to spread risk. If one asset type is performing poorly then it can be balanced by the performance of another asset.
For example it’s probably unwise to put all your savings into just one stock or cryptocurrency. If it crashes you could lose your whole investment. Instead you could consider spreading your money between the stability of cash and bonds and the exciting growth potential of stocks and cryptocurrency.
You can find some of the top trading and investing platforms here to put these investment ideas into action.
More Investment Ideas
Hopefully the above list of investment ideas has given you inspiration on how to grow your wealth. Investments are just one income source but it is also important to create multiple sources of income. You can find more articles like this on our blog including;
- Make money investing in luxury goods.
- What are the different types of dividend?
- How to create an emergency fund.
- What is a stock split?
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