Investing in stocks, bonds, or other financial instruments is a great way to build wealth over time. However, it can also be challenging to know what’s the best place to invest your money. Typically, this decision is made through experience and knowledge of the stock market and investing in general. We will help guide you by offering suggestions on where to invest your money and some of the pros and cons of each option.

1. Mutual Funds

Mutual funds are a type of investment fund that is made up of other financial instruments. For example, a mutual fund comprised of stocks would invest in stocks. In this way, mutual funds are an easy way to gain Exposure to a wide variety of investments with one purchase. They also offer a significant amount of diversification, reducing the risk associated with any individual asset. One thing to note about mutual funds is that professional investors manage them; thus, an expense ratio is associated with them that lowers returns. The pros and cons of investing in mutual funds are:

Pros

• Price and quantity diversification
• Lower risk (thanks to diversification)
• Professional management

Cons

• The expense ratio reduces returns.

2. Bonds

While stocks are an investment in a company’s performance, bonds are the opposite, which is an investment in the government’s performance. They are IOUs. There are many different types of bonds, including treasury and corporate bonds. One great benefit to investing in bonds is that they offer Safety and liquidity, thus making them an excellent option for those who need to maintain their wealth and preserve capital. The pros and cons of investing in bonds are:

Pros

• Safety and liquidity
• Investment in government securities

Cons

• Inflation can reduce the practical value of the bonds.

3. Exchange Traded Funds ( ETFs )

ETFs are similar to mutual funds, but they trade on stock exchanges, and thus their prices change throughout the day like stocks. They also have lower expenses than mutual funds, and trading commissions are significantly lower. The pros and cons of investing in ETFs are:

Pros

• Lower cost than mutual funds (thanks to lower expense ratios as well as lower trading costs)

Cons

• Loses value when the market goes down.

4. Individual Stocks ( Companies You Understand )

Individual stocks are probably the most well-known type of Investment, representing ownership in a single company. With individual stocks, investors can choose to invest in any company they know about, thus giving them a great deal of Control over their investment portfolio. Additionally, individual stocks are typically bought in smaller quantities, thus reducing the risk that a single investment will fail to meet expectations. The pros and cons of investing in an individual stock are:

Pros

• Control over your portfolio
• Exposure to a wide range of companies/industries
• Opportunity to go up (and down) as well as retain wealth if other investments go down

Cons

• Losses can be significant if the company fails and goes out of business.

5. Real Estate

Like stocks, real estate is a way to invest in a company. In this case, however, the owners are the building and land. This type of Investment has a long history of success with rich profit over time if done right. Additionally, it can be bought in increments that are small enough that you limit your risk in case something goes wrong. Accordingly, real estate is an excellent option for those who can afford to take on the risk and are interested in long-term capital growth.

The pros and cons of investing in real estate are:

Pros

• Build wealth over time (as it increases in value)
• Control over your portfolio (it depends on the real estate)

Cons

• Declining values can lose value quickly as well.

6. Peer-to-Peer Lending

Peer-to-peer lending is a relatively new way to invest money, but it can potentially be highly lucrative. It works by connecting investors looking for high rates with borrowers that might have trouble getting a loan from a bank. The borrower pays the loan, and the platform and investors collect interest payments. Because peer-to-peer lending is a relatively new method of Investment, there have been significant problems within the industry, including scams and poor investments. The pros and cons of investing in peer-to-peer lending are:

Pros

• Potential for high returns
• However, there are risks involved.

Cons

• Scams and poor investment performance
• Peer to Peer Lending exposes you to the risk of other investors who may have experienced failure.

7. Bitcoin/Blockchain Technology

Bitcoin and blockchain are two related technologies that have recently gained a lot of attention because, before their widespread use in investment vehicles, no one understood how they worked or the impact. The most widely known effect is the popularity of bitcoin, where you can send money to anyone with a computer.

This is possible because bitcoin allows for the transfer of funds with minimal fees and trackable transactions. Many small businesses accept bitcoin as payment, making it extremely useful in terms of access to products and services outside of traditional banking systems. On top of all that, projects are being developed focusing on building applications that use blockchain technology. The pros and cons of investing in bitcoin and blockchain technology are:

Pros

• Potential for high returns (thanks to growing use in commerce)
• Backup of data (in the case of Bitcoin) via blockchain technology.
• You can track all your transactions if something is stolen or lost (in the case of Bitcoin)
• There are a lot of possibilities for applications that use blockchain, which can be used to protect the digital currency from hackers and unscrupulous individuals.

Cons

• Currently, Bitcoin has very high volatility.

Investing is a specific space used to manage money to generate a profit. In essence, you are investing your money in a way that you feel will make money, hopefully where you can either do what you want with said money or use it as capital to generate more profit. Investing is the best way to build up wealth.