There are two ways you can invest your hard earn money, by lending or by ownership investments.
Let’s see what they are and some of their examples.
What are lending investments?
Lending is a type of investment in which you lend your money to corporations, governments, and banks.
These investments or debt offer a fixed rate of return and fixed maturity.
Fixed maturity is a specific date on which the borrower agrees to repay your investment amount.
And the fixed rate of return is your income of lending your money.
Lending investments are best for those who don’t want to take risks, although they carry some risks.
However, most lending investment returns are assured.
- Saving account– when you put your money in the bank account, you are lending your money.
- Certificate of deposit– is a debt instrument that carries fixed maturity (3-6 months or a year) and fixed rate of return (more than bank account).
- Bond– issued by governments or corporations have the same attributes as the CD, and their maturity can go up to 50 years or more than that.
What are ownership investments?
For folks who want to grow their money faster than lending investments, ownership is best for you.
In which you became the partial owner or altogether own something that appreciates or generates income it is called ownership investments.
If you see most of the successful people, they all have one thing in common, they own some successful businesses or they own equities in businesses.
Ownership investments are the biggest wealth builders.
If you understand these and can take calculated risks, you’re all set to invest in ownership investments.
- Stocks– are shares in the company in which you became a partial owner of that company. There are two ways to earn money stock price appreciation and dividend
- Real estate– is a good investment because you can borrow almost 80 to 90% through the mortgage loan
- Small businesses– buy someone else business or start your own business
Whether you invest in lending investments, ownership investments, or both it’s all your choice. If you’re young you can take more risk than a 50-year-old who has a family to take care of, thus you can invest 80% or more money in ownership investments.