Many – even those who have never been interested in it – are now getting into investing. Those who are trying to beat rising prices on their own and save their savings are often faced with the choice of an investment method, and there is a myriad of them.
From a simple deposit in a bank to invest in shares of a favorite company or even in cryptocurrency, these three types of investments can be called the most common today. About their advantages, features, and risks we will tell you.
Bank deposit – very reliable, but not profitable
Deposit – one of the most common types of investments: it is safe and requires a minimum of time and effort. Everything works simply: you bring money to the bank, put it on deposit, and after a while, you get your money and profit – interest.
Internally it works like this: the bank receives your money and uses it. How the bank uses it depends on its policies, but the most common method is to lend your money to other people.
For his part, the debtor provides collateral and pays the bank interest on the loan: for example, 10%. As a result, for one year of using the money, he returns 110% of the amount to the bank. The bank keeps 5% and the remaining 5% goes to the investor as interest on the deposit.
The real profit is minimal
If an investor decides to put money on deposit, he has to choose a bank and a program, bring the money and pick it up at the end of the term. This can also be done online, which simplifies the process even more. For this simplicity, the investor gets one of the most important disadvantages of deposits – their small returns.
Shares – less reliable, but more profitable
Having a share in a company is not only prestigious but also profitable.
Stocks are another common type of investment. In simple terms, it is a portion of a company’s ownership that an investor receives.
Most companies don’t stand still – they grow, increase sales of goods and services, and optimize production. When everything goes according to plan, their profits increase, which increases the value of the stock. An investor profits from buying shares cheaper and selling them higher.
If a company is growing, even the most normal growth in the share price can be greater than, for example, the return on a deposit. In some cases, companies show tens of percent growth, and in special cases, hundreds.
Stocks of companies can behave differently, and therefore – reliability is lower
Stocks can behave differently, and their price rises don’t always go as planned. Before a stock goes up in price, it can go down in price many times.
So, for example, at some point, a company’s stock price may “stagnate” or even decline. There are many nuances that affect this process. To choose the right company to invest in, you need to gather information about what is happening in the market, constantly monitor it, and analyze it.
Investing in stocks works by increasing their value over time – this is the main aspect to pay attention to. If you invest in stocks wisely, their annual return can comfortably reach 12-15%. Of course, there are exceptions – 50%, 100%, and even 500%.
For example, investing $1,000 at the beginning of last year on Facebook could bring in $1,500 at the end of the year. TSMC would bring its investor $2,000, and Tesla stock would bring the investor $5,000. In short, with the right stock, an investor will always be in the long run.
On the one hand, it’s a risk, but on the other hand, it’s an opportunity to earn more
It is always worth remembering that stock investments are completely dependent on market forces.
Even if an investor has in-depth knowledge of the market and is willing to take risks, he or she cannot always get a guaranteed profit. It can be an unexpected profit, but not always.
This investment tool is better suited for people with a high-risk appetite. An investor’s inclination to take risks should be determined by how well he can handle financial losses. Therefore, he should not forget about risk diversification.
If the investor is a beginner, it will be wise to invest a small amount of money first to test his capabilities. But if the investor is not very fond of taking risks, then keeping his financial condition in mind, it is better for him to stay away from the stock market. At least for the duration of the study.
Cryptocurrency has no guarantees, but its returns can be much higher
Cryptocurrency – such as bitcoin, is a digital currency that is sold and bought by consenting parties without a broker.
Investing and trading cryptocurrency requires an account on a cryptocurrency exchange, a method of payment, withdrawal, and time to trade. And this investment functions the same way as stocks and many assets: the price of cryptocurrencies is unstable. You can make a profit if you buy a cryptocurrency cheaper and sell it at a higher price.
Investing in cryptocurrency is a chance to get rich
Just as an investor can lose their investment in cryptocurrency, they can also increase it.
Cryptocurrencies can benefit from price fluctuations. The higher the volatility of the asset, the more you can earn – and in this, cryptocurrencies have no competition.
Popular cryptocurrencies have shown growth from 250% to almost 3000% over the last year. By investing a notional $1000 in bitcoin, you could get $2000 in the last 3 months, and almost $9000 in a year. Etherium over the last year would have yielded $14,000, Lightcoin $5000, Ripple $2,500, and the seemingly “buffoonish” Dogecoin would have brought its investor almost $30,000 in a year.
To predict the price of a cryptocurrency, you don’t need to be an expert in the relevant field yourself. In fact, the system of rising and fall of its price depends on the events in the world, the demand and work of the project. If one observes this process and reacts to the events in time, the investor can either stay with the loss or make quite a substantial profit.
So which investment is better?
There will never be a universal answer to this question. An investor’s direction should reflect his or her goals and abilities.
If the goal is to save money from inflation, but the investor has no time or desire to control his investments, then a bank deposit is a good option. It is simple, quick, and uncomplicated. Such investment will allow receiving a minimum real profit.
If an investor wants not only to save his savings but also, perhaps, to multiply them – a bank deposit is not enough. Only the profitability of shares and cryptocurrencies can help an investor to multiply his investments. It is possible to get a real benefit only after spending time and effort to find a suitable asset and invest in it.
Although stocks are securities, in today’s world they hardly ever walk around in the classic form of papers proper and exist in book-entry form. An investor who does not want to waste extra time and deal with “live” trading can use the services of special platforms today.
Currency.com is a convenient crypto-platform where one can make transactions with tokenized exchange-traded assets, cryptocurrencies, using charts and indicators, price alerts, and other services to help understand a particular asset.