Need for investments

Investments are the process of employing the funds with the hope of achieving additional income or growth in value. There are different types of investments that you can consider based on your income and returns. Furthermore, the investments are divided into long term and short term. Long term investments are generally stocks, bonds, real estate and cash. Before investing, it is always better to know the basics.

You can learn stock trading online free of cost with the resources in videos and articles provided by some websites or try to read books on investment. Short term investments are those with lesser risk and return. Savings account, cash management accounts, short term corporate bonds, deposit certificates, government bonds, etc.

Short term investments:

If you are looking for short term investments, you are ordinarily doing to stash your cash safely. However, it comes at a cost. You won’t get many returns in short term investments. In short term investments, your money is more likely to be liquid so that you can get it whenever you want. They have limited downside or none at all and also have lower risk than long term investments. The best short term investments are listed below.

Savings account:

Savings bank accounts are better for holding cash than in current accounts, as they offer good interest comparatively for your money regularly. Always check which banks give you the best interest rates before putting in your money. As far as savings accounts are concerned, there are no risks involved, but keeping your money for the long term may not cope with inflation. Liquidity in savings accounts is high and can be transferred easily to your account whenever you need it.

Money market savings:

These are another kind of savings account with higher interest rates. The only downside is that a minimum investment amount is required to process. Money market accounts are also highly liquid but make sure not to invest for the long term as they may not keep up with inflation. There are zero risks since your money will be insured.

Certificates of deposit:

Certificates of deposit or CDs yield higher returns than savings accounts and market accounts. You can find CDs in your bank, and the only downside is their low liquidity. Certificates of deposit are time-specific, meaning you need to hold your money for a certain period that depends on the maturity you need. Having a certificate of deposits, you can earn interest every month and, after maturity, the bank returns your principal amount with the gained interest.

Corporate bonds and government bonds

Major corporations issue bonds for funding their investments. These bonds are open to the public, which offers interest quarterly or twice a year. Bond funds are a collection of bonds offered by various corporations so, if a particular one is not performing well, it doesn’t affect the overall return of the bonds. Broadly diversified bonds have lesser risk than less diversified ones. The liquidity of short term bonds are very high and can be bought and sold wherever you want.

Government bonds are issued by the government and the agencies related to them. They have low risk as the government backs them. Sometimes they may have low interest rates compared to other investments in this segment.

Long term investments:

Long term investments include stocks, bonds, cash and real estate. Long term investments are generally more than a year. Being a long term investor, you must be aware of the risks but, the returns you get are very high. When you say long term investments, the first thing that pops in your head is stock trading. Although they involve risk, they are highly rewarding when you do them properly by knowing the basics. If you want to learn stock trading online for free, make sure they are from a genuine and safe source.

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