More on those opportunities in later articles. Right now, let's consider the different things that you can do with your money in order to put it to work for you.
Eliminate Debt First
Before you start investing your money in securities and accounts that can return anywhere from 2% to more than 10% in a year, you must eliminate that credit card debt.
Some people will tell you that you should keep a single credit card for emergencies and use it at least once per month in order to keep a good credit rating. This point is debatable but if you choose to do this, keep your balance below a few hundred dollars. Even a balance of just $1,000 on a card could turn into a few hundred dollars lost per year due given present interest rates..
Savings accounts, money markets, certificates of deposit (CD) and other bank accounts are very conservative investment choices. In general, the risk is very low. As long as the bank does not fail, your money will be safe. As of 2017, you can expect anywhere from a little less than 1% to as much as 2% interest per year for most such accounts.
Prior to the present age of the Internet, you could only take advantage of CDs, which offer better
returns than savings accounts, if you could open the account with a minimum of five or ten thousand dollars. Now, with Internet banks, you can open a CD with $100 or even less and still get as much as 2% interest, which beats the average savings account today.
This is a great way to save money if you are low-income but still want to enjoy the benefits of compounding interest. You can sock away $100 at a time at no cost.
However, you should understand that you cannot take the money out of a CD before maturity without paying a penalty, so don't do it unless you are sure that you can keep your hands off the money. Don't open a CD if you have massive credit card debt. Pay the debt, then save money.
Our knowledge of bonds is theoretical. With low cost CDs available and bond returns well below 2%, it does not seem to make sense t
o invest in a few federal bonds at a time. There are also bonds issued by corporations and local governments which will pay higher interest rates but they are riskier in terms of getting your principal paid back. Access to them is also more complicated.
You can buy T-notes for $100 each from the US Treasury website. The yield on these notes changes from day to day but is generally pretty low. As of April 2017, you can get above 2% on a ten-year note. That means that each year the Treasury will send you the money earned from the note. You do not have the opportunity of compounded interest on this investment.
There is good reason to feel a little apprehension about investing in the stock market, Stories about depressions and recessions are not just stories - they are real events that wiped out the wealth of millions of people. However, millions more have survived all these events with their wealth intact by obeying a few simple rules of stock investment.
People who are not invested, or who allow brokers to manage their money, often think of stock investment as a form of gambling. Unfortunately, there are people who treat it this way, sinking money into names and numbers they see on stock tickers and betting that the numbers will go up or down.
Successful long-term investors understand that investment in stocks is simply investment in the businesses that make up the economy itself. They focus on buying shares in companies with proven records of success.
Most importantly, they buy stocks that will pay dividends. When you buy dividend stocks, you receive money every month, quarter or year, depending on the company behind the stock. This money is not taken from your holdings and it does not reduce your stake in the company. It is your rightful portion of the profits as a partial owner of the company.
When you take this money and reinvest it into more stocks or other forms of investment, you will see that your wealth continues to grow steadily, whether the market crashes or not.
In prepping and/or alt-right circles, precious metals investments are all the rage. You will hear some people say that they only invest in precious metals and that this is the safest and ultimately the most lucrative form of investment.
In addition, you may hear some cryptic references to the coming collapse of the economy. Apparently, in the future, we will all inhabit a stone age world reduced to a barter and trade economy. Somehow, your store of gold coins is going to help you manage this scenario successfully.
The knights do not participate in this doomsday porn but that does not mean that precious metal investment is bunk. A look at most investment portfolios of rich men around the world will reveal that they devote a varying portion of their wealth to precious metal holdings.
When you have finished paying off your debt and are beginning to buy bank products and stocks, consider putting five or ten percent of your savings into precious metals. Their value tends to increase when stock values drop. This provides some balance to your portfolio and lessens the impact of market setbacks.
This is article is not long enough to cover the benefits of any single type of investment, let alone all of them. Let it suffice to say that there are many investment possibilities for your money and it is a good idea to spread out your wealth into different areas.
A quick mention of potential alternative investments include real estate, direct investments in oil or gas, pieces of art and other types of collections.
Future articles will cover all these investment opportunities individually and in in greater depth.