Imagine that you have $3000 and you are not going to spend them “on living”, a new mobile or mortgage payment. It is spare money. A reasonable question arises, where it is better to invest money, to get more profits. The best-known way, depositing money with bank, is not the best.
1. Making a financial cushion
What for? A financial cushion is necessary in case an urgent need arises or your monthly income decreases suddenly. Its amount should cover the budget costs for a couple of months. That is, if your income is $1500 and you can afford to buy food, dine with your friends in restaurant from time to time, pay taxes, buy petrol or pay transport fares, than your financial cushion should amount to at least $3000. It should be understood, that this financial reserve is not the savings for big purchases or a holiday trip. It is thought, that every person or a family should have a financial cushion, that will provide comfortable life during, for example, the period of job search, in case the present one is lost. As a rule, more than a half of the people, searching for a new job, are doing that during a couple of months.
How? The financial cushion should be freely accessed, so to make it, it’s better to use a savings account in any bank. You can deposit the account by yourself or activate Auto-Pay service. The bank will every month transfer the sum, you indicated, from your salary card to your savings account.
Advantages. You can’t accidentally spend the money, as it is kept on a separate account. Besides, in many banks, there is an interest rate up to 6% on savings.
Drawbacks. However, the income rate only covers inflation but doesn’t provide any additional profit.
2. Investing in self-development
What for? Investing money in your personal development and learning new useful skills in a certain area of activity is an investment in yourself. Such kind of investment bears no risks and is rather efficient, as with its help you will get more profits, using the new knowledge and generating new ideas for making money.
How? Study online, read necessary books, attend refresher course, thematic training courses and seminars, buy quality information products and tools, take care of your health. And most importantly, try to practically implement everything you’ve learnt.
Advantages. High professional skills and excellent th are the assets that will belong to you irrespective of inflation level and dollar rate. Any time you can apply your potential to the necessary area.
Disadvantages. Your need time and energy to develop yourself: read and listen to lectures, attend seminars and training courses, do your home tasks. To improve your health, you should undergo a thorough medical examination, follow doctor’s advice, give up bad habits, attend gym and eat healthy food.
3. Investment in a dream
What for? Investing money in your dear dream, a new smartphone, traveling, apartment renovation, arranging a fancy wedding for your daughter, is a wise investment. A motivated person will spare no efforts to find better opportunities and save up the necessary money as soon as possible.
How? You, of course, can put money into a stocking or under your pillow, but that won’t save your money from depreciating due to growing inflation. If your are going to save up a big sum of money, it is better to open an interest-bearing savings account and deposit it regularly. Compare different banks’ offers for bank deposits, chose the highest deposit rate. Besides, pay attention if there is capitalization of interest and deposit insurance available. Christmas Eve is the best time to open a savings account, because banks offer higher interest rates. It is thought, that your dream will come true sooner if you visualize it in great detail.
Advantages. Interest rates allow to cover inflation costs.
Drawbacks. If you withdraw the total amount of deposit, you are likely to lose the interest gains. That is why opening such an account is suitable for savings by a certain date.
4. Investment in children's’ future
What for? Investing in your children’s future is an important issue that is faced by many parents. The most popular way to provide financially your child is to open an interest-bearing savings account in child’s name. However, unfortunately, not all the banks can withstand financial crises. So, if don’t want to worry about your money safety and are willing to contribute to your children’s or grandchildren’s future, buy something that won’t lose its value for a long time, gold bars or precious metal coins. As a rule, that is gold, which becomes a “safe-heaven” for most investors during economic crises.
How? You can buy a few grams of gold in a bar or coins for $3000, which you can keep both at home and in a safe deposit box.
Advantages. Precious metals price rises significantly during potential crises and shocks. So, if you, as a future depositor, worry about your money safety in bank accounts, buy gold.
Disadvantages. There are a few drawbacks of investing in gold. First, additional costs for storing it in a safe deposit box. Second, payments of tax and bank's certain markup on gold bars.
As an alternative in this situation, you can open a metal account. Such account is not taxed, doesn’t include additional payments for production, shipping and storage of bars. But a metal account is a kind of banking instrument and is subject to risks. For example, if there is a default, officially declared in the country, a bank can close without paying compensation to depositors, that means, metal accounts owners can lose their virtual gold.
5. Investment in growth
What for? All the above ways to invest money are quite popular but they won’t significantly increase the initial amount. So, it’s hardly possible to make large profits, having deposited $3000 in an interest-bearing savings account which yields 4-10% with inflation of 5-8%. To provide a significant growth of the amount available, it is better to operate such financial instruments as stocks or currency pairs.
Trading currencies price changing is known to yield high profits. It is important to learn efficient trading methods and work out your own strategy.
How? Study the market situation, the psychology of its main participants, follow constantly the currencies rates changes, work out your own strategy and try to strictly observe its rules. Control your emotions. Those market participants become professionals, who can manage high psychological pressure.
Advantages. Financial world knows the cases when large corporations stocks grew by 50,000%. So much, for example, have increased shares of Apple Inc. company since it was founded in 1980. Trading currency, of course, won’t increase your initial investment so much, but it can well double or triple the initial deposit.
Drawbacks. Exactly such stories about the yield of 50,000% attract inexperienced philistines to trading stocks and currencies. Only professional market participants can make high profits from currencies and stocks price changes.
6. Investment in social trading
What for? If you are not sure that you can independently trade stocks or currency pairs, or you don’t have sufficient experience to trade in foreign exchange market, then you can learn necessary skill and make profits at the same time, duplicating professional traders’ transactions. If you have reached a high trading skill level, have your own efficient strategy, then you can become an example to follow and get simultaneously an additional income, receiving commission fees from investors accounts.
How. Register in automated trade copying system SocialTrading and open an investor’s account, next you should choose from the open monitoring one or several successful traders and synchronize your trading with them. One investor’s account is attached only to one trader's account, so, to copy several successful traders, it is necessary to open several accounts. You can duplicate professionals’ transactions or simply follow their activity in the news feed, improving your trading skills.
If you are an experienced trader, willing to share the information about your trading activity and get an additional income, then, to attract investors, open a trader’s account on the social trading platform, trade successfully and go to the top of online monitoring.
Advantages. While copying professionals’ trades on the platform, you use practical experience of other service participants and reach your major goals – learn to trade independently and make money. Besides, your investment is on your personal trading account, which can be accessed only by you. Moreover, you can communicate with the trader, who provides the account for duplicating, learn about his strategy, risk level, recommended minimum investment.
What to pay attention to. When selecting the provider for trades, you should pay attention to the trading account performance; period of work, yield, number of investors, and chose the most reliable trader. Besides, to minimize the risks, there are four kinds of settings for trades duplicating.
- Make a financial cushion, if you don’t have any. Open a savings account and deposit your $3000 there. However, remember that your shouldn’t spend the money on trifles, use it only in case of emergency.
- If you already have a financial cushion, you can invest the money in your dream, personal development or children’s future.
- If you wish to get a higher growth of your savings and are sure of yourself, start making profits from stocks and currencies price changes.
- If you don’t have sufficient experience to trade in forex independently, join automated trade copying service Social Trading.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.