Don’t we all? If I had a nickel for every time my father uttered, “You think money grows on trees?”, I wouldn’t need one of those trees. Money may not grow on trees but there is potential for it to be “grown”. Part of any good cash management system involves “growing” your money. In other words, putting the cash that you do have to manage in some type of an investment account. There are literally hundreds of investment opportunities for your money. Hundreds of trees if you will. Stocks, bonds, 401k’s, IRA,s, bank CD,s, and real estate are just a few of the places money can potentially be grown. The question is: What is the best investment for you?
There is no “best investment “. There is no shortage of free financial advise in the marketplace right now. And consequently no shortage of “best investments”. Everybody has different cash management philosophies so the following factors inherent to these investments are going to determine which investment opportunity is best for you.
RISK and RETURNS-Every investment has different levels of risk and different potentials for returns. When investing, one must realize that there is risk and potential for return, but no guarantee that money will be made. If you are looking for a low level of risk in investing, then a CD,or certificate of deposit may be the way to go. CD’s offer a relatively low interest rate and consequently have a low potential for return. Conversely, a hedge fund, which is a privately, aggressively managed investment fund that utilizes sophisticated strategies in both the international and domestic markets, has a very high level of risk. These funds are designed to acheive higher rates of returns than traditional stocks and bonds.
SIZE-The amount of money you have to invest will also determine which investment opportunity that is right for you. Historically, mutual funds, have offered an investor a “middle of the road” investment opportunity. A mutual fund pools money together from thousands of small investors and then its manager buys stocks, bonds or other securities with it. Some mutual funds have large mininum cash requirements to get started while others have very low, reasonable cash requirements. It is up to you to decide, as part of the financial money management plan you have, how much cash you want to invest and if it meets a mutual fund requirement. Many mutual funds offer products that have different levels of risk built in so you can choose what risk is comfortable for you.
ADVICE-As I mentioned earlier there is plenty of free financial advice available to you everyday. Every one has an opinion and financial money management is no different. Finding a qualified financial advisor in these types of investments is absolutely necessary to make the right cash investment decision. When we are sick, we visit the doctor for advice. The same can be said when we want to grow our money. A financial advisor is a licensed professional who renders financial services advice to individuals, businesses and governments. A financial advisor can help determine the best investment for you based on your risk level, the amount of money you have to invest, and what investment you feel most comfortable with. Most importantly, a financial advisor can help you find your tree and start watering it.
Responsible and proactive cash mangement requires investing your money. Most importantly, having all of the necessary information about your investment opportunities will increase your chances of experiencing growth.