Deciding on the best investment depends on one’s goals, need for money and risk tolerance. Different purposes require different approaches and hence places of investing. Now let’s take retirement; if you want to invest money 30 year before you retire you will be likely to consider rather riskier investment products. This is because you take into account that in case of sticking to only “savings” products or to less risky investment products your account will increase very slowly.
The investment for short-term goal, let’s say a few years, does not require risky investments, as during the time of sale you may have losses. People usually make a mistake by putting the money in investment which they won’t need for a long term and thus pay a low amount of interest. Considering that investments frequently move up and down in value you can wait and sell at the best possible time.
While making an investment you give your money to a company or enterprise with the expectation that you will be paid back with even more money.
Investors have an opportunity to invest in stocks or bonds. To understand the difference between them we can illustrate the following example. A company that makes automobiles is believed to be a good investment. You know that it gains high reputation and most people buy its cars. After investigating you become convinced that it’s a really solid company and year by year it will sell more and more cars. Note that the company allows you to buy both stocks and bonds. In case you buy bonds the company takes responsibility to in ten years pay you back your initial investment plus the interest twice a year at the rate of 8% a year.
While buying the stock you put some portion or all of your investment into the risk of losing in case the company affairs go bad or the stock market falls in value. However, the stock may increase in value and as a result you can earn much more than you could do by bonds.
On the one hand you rely on the company seeing that it has been in business for a considerably long time and doesn’t look like to go bankruptcy. On the other hand you are afraid of taking risk.
After disusing the example you can easily differentiate the features of investing in bonds and stocks. However as far as it refers to your choice of investing you need to take your time and make a careful decision as only time will tell if you made the right choice.