Types of Investments
Investments, as you might expect, come in all different shapes and sizes just like people.
When choosing an investment it is important to understand how it differs from the others and whether it suits your own personal financial situation.
Income vs. Capital Growth
Did you know that investments can earn you money in two different ways?
- By growing in value and selling for more than you paid – this is called “Capital Growth”
- Earning you income in the form of interest, rent or dividends during the time you own them
Some investments will earn you more money in capital (but you won’t get any of it until you sell), while others are focused on bringing in the income on a regular basis (but may not sell for more than you paid).
Short Term vs. Long Term
Investment and impatience do not really go together very well. Unfortunately many of us tend to be impatient, and that’s how people get scammed in “get rich quick” schemes.
Basically, the longer you’re prepared to own your investment, the more money it will earn – and we’re talking years here. There are some shorter-term investments, but they don’t earn as much. SO it’s often a case of getting less sooner (short-term investment), or hanging out for more later (long-term investment) – it’s your call!
Risk vs. Return
Investment can be risky – and some investments are riskier than others. This means you could sink your savings into an asset, believing that it will grow in value, only to have it depreciate, and you lose money.
Normally this loss of value is not something you can control – it is caused by events in the economy and around the world. For instance, after the September 11 attacks in the USA the price of shares all around the world took a dive. People everywhere had shares that suddenly were worth much less, and nobody could have predicted it.
At this point you have to decide whether to sell your asset and take what you can, or hold on until prices rise again.
As fate would have it, high-risk investments generally earn more, while the safer ones bring returns at a lesser rate. So big risk can mean big return, or potentially big loss. Lower risk investments are more of a sure thing but you won’t make squillions overnight.
To complicate matters, we all feel comfortable with different levels of risk… Some of us play it safe while others are happy to live on the edge.
Now we know what to look for, let’s see what cash investments have to offer.
If you want to Invest Through a Credit Union, you can’t go wrong with Riegelwood Credit Union.