If you are considering investing your money, whether for retirement or to build wealth, diversifying your investments is a good way to protect them during market fluctuations. As the saying goes, ‘don’t put all your eggs in the same basket’ because if something happens to that basket, then all of your eggs, or in this case money, could be lost.
There are four main categories of investments or asset classes you can use to help grow your money. These classes are:
- Cash Investments;
- Fixed Interest Investments;
- Share Investments; and
- Property Investments.
A financial planner can help you select the investments that are best suited for your needs and those that will help you meet your financial goals. They have tools at their disposal, such as financial planning software, that can show you how certain investments will affect the growth of your money.
A cash investment will provide a stable income through interest payments, although some cash investments pay very little interest. Examples of cash investments include regular and high-interest savings accounts. Although cash investments are the least risky type of investment, interest rates on these accounts can fluctuate, slowing the rate of growth for these types of accounts. You can open these types of accounts on your own in banks and credit unions.
Fixed Interest Investments
There are three different types of fixed interest investments that are used as investments. They include:
- Term Deposits;
- Government Bonds; and
- Corporate Bonds.
Term deposits, such as certificates of deposit, usually have higher interest rates than cash investments. You put your money into a term deposit for a certain length of time, like 12 months, and when it matures, you will have the original amount of money, plus the interest that it made.
Government or corporate bonds are essentially loans to the government or companies that you make by buying their bonds. These bonds like a term deposit, because you buy them for a certain length of time and you are paid interest on the bonds. Fixed interest investments are also low-risk, but some bonds can decrease in value, so you will make less money.
This is a type of growth investment in which your money will generally grow faster than with cash or fixed interest investments. When you buy shares, you are buying partial ownership of a company and you can make money, depending on the market, but you can lose money as well. In order to buy shares, you have to use the services of a licensed broker.
This is another type of growth investment, but less risky than buying shares as real estate usually increases in value. You can purchase commercial or residential real estate as an investment, which is a good way to build wealth as you can earn money from it on a regular basis.
When you’re ready to invest, discuss your options with a licensed financial planner. They can help you find the best ways to invest your money to meet your long- or short-term financial goals.