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The Diverse Range Of Investing Market Online

Saving money and then watching it grow is an exciting thing but this requires knowing the investing market. In addition to a standard savings account, people invest with IRAs stocks, bonds, real estate, businesses, 401K programs, and so on. The good news is that when it comes to investing, you have many excellent options from which to choose. Obviously, you want to choose the option that will make the most out of your hard-earned money.

Rate of return – the key to long term wealth

Once you know why you're investing and how to get started, it's time to dig deeper and pick some investments. There are several categories of investments, and many of those categories have thousands of choices within them. So finding the right ones isn't as easy as it appears

The most important factor in growing your long-term wealth is the rate of return you get on your investment. There are times when you may need to park your money someplace for a short time, even though you won't get very good returns. Here is a summary of the most common short-term savings vehicles:

Short-term savings vehicles

  • Savings account Savings accounts earn a small amount in interest, so they're a little better than that dusty piggy bank on the dresser.
  • Money market funds These are a specialized type of mutual fund that invest in extremely short-term bonds. Unlike most mutual funds, shares in a money market fund are designed to be worth $1 at all times. Money market funds usually pay better interest rates than a conventional savings account does, but you'll earn less than what you could get in certificates of deposit.
  • Certificate of deposit (CD) This is a specialized deposit you make at a bank or other financial institution. The interest rate on CDs is usually about the same as that of short- or intermediate-term bonds, depending on the duration of the CD. Interest is paid at regular intervals until the CD matures, at which point you get the money you originally deposited plus the accumulated interest payments. CDs through banks are usually insured up to $100,000.

Some players in the investing market are partial to investing in stocks, as opposed to other long-term investing vehicles, because stocks have historically offered the highest return on our money. Here are the most common long-term investing vehicles:

Long-term investing vehicles

  • Bonds come in various forms. They're known as "fixed-income" securities because the amount of income the bond generates each year is "fixed," or set, when the bond is sold. From an investor's point of view, bonds are similar to CDs, except that the government or corporations issue them, instead of banks.
  • Stocks are a way for individuals to own parts of businesses. A share of stock represents a proportional share of ownership in a company. As the value of the company changes, the value of the share in that company rises and falls.
  • Mutual funds Mutual funds are a way for investors to pool their money to buy stocks, bonds, or anything else the fund manager decides is worthwhile. Instead of managing your money yourself, you turn over the responsibility of managing that money to a professional.

Why stocks are popular in the investing market

Investing in stocks, especially online stocks are popular because historically, they've had much better returns than bonds and other investments. Essentially online stocks let you own a part of a business. Dating back to the Dutch mutual stock corporations of the 16th century, the modern stock market exists as a way for entrepreneurs to finance businesses using money collected from investors. In return for putting up the funds to finance the company, the investor becomes a part-owner of the company. That ownership is represented by stock -- specialized financial "securities," or financial instruments -- that are "secured" by a claim on the assets and profits of a company.

Shareholders "own" a part of the assets of the company and part of the stream of cash those assets generate. As the company acquires more assets and the stream of cash it generates gets larger, the value of the business increases. This increase in the value of the business is what drives up the value of the stock in that business.

As with most things in life, the potential reward from investing in stock in a growing business has some possible pitfalls. Shareholders also get a full share of the risk inherent in operating the business. If things go bad, their shares of stock may decrease in value. They could even end up being worthless if the company goes bankrupt.

While there are many options for launching into the investing market, it pays to get a thorough understanding of the various options and get the advice of experts in the field. Armed with the knowledge, you can test the waters and gradually gain confidence to begin investing like a true professional.