Pros and Cons to Three Popular Investments
There is a wide range of investments to make, with different pros and cons to consider with each one. Below, we explore three types of popular investments so that you can choose which one is right for you.
Mutual funds
A mutual fund is an investment group that pulls together money from different parties to create a diversified portfolio. The fund is invested by managers who select the accounts to buy with money from the pool. Gains are then distributed equally to everyone who has invested in the fund.
A pro to mutual funds is that they offer an easy way for you to invest in a diversified account and tend to cost less with upfront costs. The most obvious con is that you have no control over your portfolio. If you want to invest in something specific, a stock from a certain company for example, then you won’t have a say in whether or not you actually do that.
Stocks
Stocks are publicly traded shares of a company, so when you buy a stock you are buying part-ownership of a company. You make a return on investment if you receive dividends from the stock, or if you sell the stock for a profit.
In the long term, stocks tend to see more gain than other types of investments with higher return rates. Another pro is that it is easy to watch your money in real time by watching the stock market and seeing the price of your stock go up and down. A significant con is that the stock market can fall as quickly as it can rise. The value of a stock is tied to the market which lead to significant gains and losses, including losing the entirety of your investment.
Bonds
Think of a bond as a loan that you are making to a company or other entity, such as a government, that will pay you back the price of the bond, with interest, at a certain date.
The pros for bonds are that they significantly less risky than stocks, that your investment return is fixed, and that there will be clear ratings from AAA to C to show how risky the bond is. A con is that you are less likely to make significant amounts of money from a bond and that a bond’s interest rate fluctuates with the market meaning you can make less money if interest rates go up.
At the end of the day, what you choose to invest in is up to you. Some people are more interested in investing in something safe, like a mutual fund, while others want a riskier, more gainful opportunity like stocks. And there are many different types of investment opportunities like investing in real estate or getting a CD. At the Bank of the Lowcountry, we can help you choose which avenue of investing you would like to go into and help you make an investment in your money that can better accomplish your financial goals.
