• Monday, April 15, 2024
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BusinessDay

Where your money goes to work, where do you invest?

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 ”Ho w m u c h should you invest and where?” This is a question frequently asked by savers who want to start making their money work for them. This simple question can actually be difficult to answer since there are so many ways to invest with different people having varied levels of risk tolerance. Here are a few ways to invest, however, you can decide on which path to take.

Almost zero-risk investments 

If you absolutely don’t want to lose your money, then you can put it in a high-yield savings or checking account, money market account, or certificate of deposit. You can put all your money into these investment vehicles and most likely be guaranteed that you won’t lose any. The downside is that right now most of these pay very little interest, so the purchasing power of your money could be eroded by inflation. If you don’t have a lot of money and don’t want to lose any of it, then this is probably the way to go.

Slightly more-risk investments

If you have some thousands of Naira to invest and do not want to do much work, then it is quite easy to just put your money in a mutual fund. However, there are thousands of mutual funds that put money in a variety of investments, and you need to investigate which is best for you. However, if you do take this path and invest in mutual funds that are mostly stock based, you need to know that it is possible for the funds to vary wildly with the ebbs and flows of the stock market. If you tend to panic when you watch your money go down or if you need the money right away, then this is probably not for you.

Investments with more risk and work 

If you are into research and do not mind watching your investments often, then you can try your hand at building your own stock portfolio by buying individual stocks or ETFs. Many times the stock or ETF is sold within hours or days of their purchase. Some people also trade options, but that’s not for beginners. If you want to try your hand at picking stocks, a suggestion would be not to put all your money in right away, because it is possible to lose a large chunk in the matter of days. Some people call this speculation, not investing.

Investments with lots of risk, work, and possible reward 

When you know some investments well, it is possible to invest without putting up any of your own money and instead borrow the capital you need. For example, some real estate investors will borrow 100 percent of the money they need to buy houses and then either quickly flip the house or rent the house out and then refinance. Other investors borrow the capital for a business and then pay the loan back over years with the business’s cash flow. These methods of investing require a lot more work, and if you don’t know what you are doing, you are almost guaranteed to lose money. The upside is that if you make money, you are doing it with other people’s funds and you can repeat the process and make more money. If you want to go down this path, you would need to do a lot of research and learn about the business you are targeting.

 

NONSO NDUMANYA