7 Ways to Invest Free Money and Get Income
Contents
- Certificate of Deposit
- Money Market Account
- Dividend-Paying Stock
- Real Estate
- Savings Accounts
- Corporate Bonds
- Preferred Stock
- Conclusion
The great news is that there are many ways to invest your money. The bad news is that a lot of people lack investment knowledge or, are simply ignorant to the various ways they can invest. But don’t fret, you’ve come to the right place. With our assistance, we’ll help you find great investment options that fit your risk profile. This way, you can invest your free money into great investment options that give you great income.
Top 7 Ways to Invest Free Money and Acquire Income
- Certificate of Deposit
- Money Market Account
- Dividend-Paying Stock
- Real Estate
- Savings Accounts
- Corporate Bonds
- Preferred Stock
Certificate of deposits, otherwise known as CDs, are bank-issued and offer higher interest rates compared to savings accounts. They are insured time-deposits with maturity dates ranging between several weeks to several years. Since they are time-based, you can’t withdraw the money until the specified period of time. Furthermore, withdraw before time accrues a penalty.
With a certificate of deposit, the bank pays you interest at regular intervals. Once the time-period matures, you get your original amount back along with any accrued interests. For these reason, CDs are ideal for investors with idle money who don’t require immediate income. Furthermore, they are different kinds of CDs to fit any kind of investment need.
This is an FDIC (Federal Deposit Insurance Corporation)-insured, interest bearing deposit account. It’s ideal for newbie investors who want to build up cash flow or set up an emergency fund. Compared to a savings account, a money market account earns a higher interest and requires a higher minimum balance. The opportunity cost of this is withdrawal restrictions and access to money limits.
As suggested earlier, these accounts are especially liquid and come with the additional option of writing checks from the account. Of course, the frequency of use is limited to six withdrawals per month, with three of these being checks.
Another great way to earn income is to invest in dividend-yielding stock. Dividends are part of the firm’s profit that is paid out to shareholders. Thus, with a dividend-yielding stock, not only can you earn via long-term market appreciation, but also, you get the chance to earn cash in the short-term. Furthermore, if you wish, you could always re-invest your dividend for higher returns.
They are ideal for both intermediate and advanced investors. However, as with most other investment options, dividend-paying stock come with their own set of risks. The best way to maneuver this is to invest in firms that have a solid-record of dividend increases. Don’t just select stocks that have high dividend pay-outs.
Investing in real estate is one of the most appealing and lucrative ways to invest and earn a solid income. To start, you just need to buy or finance a property. The key is to make smart purchases (land, property, etc.). The start might be rocky but once you have proper footing, you’ll have created a powerful passive cash flow.
The only downside to real-estate is that it’s kind of expensive to invest in. Lands and properties have gone up in value and there’s also the occasional risk of an area not being ideal. Furthermore, it’s less liquid and thus doesn’t appeal to investors who need access to cash quickly.
While most people may not consider savings accounts as ideal investments, they do offer a modest return on your cash. There are a variety of savings accounts with different percentage yields. If you are willing to conduct some extra research, you may find ones that have attractive percentages than others.
The advantage of a saving account is that it’s government insured. That means, your money is completely safe. Even if the bank fails, you’ll still be compensated. The only downside to operating a savings account is that inflation can erode the value and purchasing power of the money in the account.
Another great investment asset that you can invest your free money into is corporate bonds. These are less-risky than stocks. Furthermore, compared to stockholders, bondholders are in a greater financial position as they are more likely to get their money back than stockholders if a firm goes bankrupt.
The only risks associated with corporate bonds are interest-rate risk and default risk. Interest-rate risk is the risk of a bond changing in value If interest rates change. However, you can mitigate this risk by selecting bonds that mature early, few years probably. Default risk comes from if the firm fails to deliver interest and principal payments. You can mitigate this risk by investing in quality bonds from large reputable firms.
This kind of stocks are more like bonds than stocks. Just like bonds, they make regular cash payments. The only downside is that the regular payments may be suspended in some instances. However, any missed payments are always made thereafter.
Preferred stock may be riskier than a bond but it’s genuinely safer than a stock. For starters, holders of preferred stock usually get paid out sooner after bond holders. Stockholders get paid last. You can find preferred stock on stock exchanges. However, you need to analyze them carefully before making any purchases.
Conclusion
Investing is a great option for those who want to build their wealth over time. Fortunately, there are very many ways to go about this. Some ways are extremely lucrative while others are risky and may take some time. Therefore, It’s important that you learn about each investment option as a guide to making informed choices. Don’t just spend your free money, start investing today for a greater return tomorrow.
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