Investing your income is an essential part of planning your future. This investment may be for your retirement, buying a new home, paying for an education or more. Setting money aside and growing its value is an excellent way to increase your savings and exceed your income.
Fortunately, there are many options some that involve high risks like company stocks, and some of low risk, such as a savings account or a Guaranteed Investment Certificate. Financial advisors always recommend a combination of investment options to balance the risk and increase the investment growth. Of course, high-risk investments offer more value, helping to build your wealth quickly. All in all, if you do not invest, you miss out on the opportunity of increasing your financial worth and securing a healthy financial future.
Different types of investment strategies can help you reach your financial goals quicker as you earn a rate of return within a short period. You can buy a home sooner, buy the car you like, start your own business, own shares in a company, or put your children through the top universities in the country.
Here are the most common types of investment strategies:
1. Savings Account
If you are looking for a safe and risk-free type of investment strategy, a savings account will be a good option. All banks and credit unions offer this investment option. The only difference will be the interest rate each one provides.
Find a bank or financial institution that can provide you with a high return rate for your investment. The advantage of this type of investment is that you can withdraw your money at any time. Secondly, you can open an account with as little as $100 or even less. This allows you to start saving even if you do not have a lot of money to save at the start.
2. Certificate of Deposit
Most financial institutions, credit unions and banks offer Certificates of Deposit (CD). These types of investment strategies are similar to savings accounts, but are long-term and fixed for an agreed time often three to ten years.
However, CDs earn more interest than an ordinary savings account, but you cannot access the funds at any time and will have to wait until the CD reaches the end of its term. The advantage of this type of investment is that it is risk-free as regardless of the market conditions, your money will keep growing with the interest rate.
3. Guaranteed Investment Certificate (GIC)
Choosing a GIC is one of the safer types of investment strategies. You never have to worry about losing your money as it is guaranteed. You can select the term you prefer either six months or three years to benefit from the GIC investment.
Usually, for a GIC investment, you need to start with $500. The GIC will pay a fixed rate or a variable rate of interest for the set term. The longer the term, the higher the interest rate you earn. Some GICs allow you to access your money before the term, while others can include a penalty fee. In case you plan on withdrawing the money before the maturity date, you may want to consider a cashable or redeemable GIC.
4. Registered Retirement Savings Plan (RRSP)
Financial security is vital during your retirement. The RRSP is a popular investment account that helps in saving for your old age. Tax benefits are the primary motivation for opening an RRSP.
Your investment grows and is never taxed unless you withdraw the money before retirement. There are other advantages to investing in RRSPs. You can easily buy your first home with the tax savings or refunds you earn. Another advantage is that your savings increase with the tax-free compounding.
5. Annuity Investments
An annuity is an investment that will pay you an income over regular intervals and is usually an investment used for retirement. It offers a guaranteed income but is not as popular as the RRSP. This investment is simple, you provide a sum of money, and you will receive a steady stream of payments when retired.
6. Bond Investments
A bond is a certificate confirming the money you offer to a company or government as a loan. The issuer of this bond promises to pay you an interest rate over a period of time and until a set date. There is a risk of course for investing in bonds. You can lose some or all of the money you invested, but it is less risky compared to stock investments. The general rule though is that to earn a higher return, you have to take greater risks.
7. Stock Investments
You can earn a high return with stock investments, that is if you are willing to take a risk. Stocks can generate a higher income than bonds, especially if there is an unlimited potential of a rising stock price. Also, investing in stocks gives you partial ownership of a company and allows you to benefit from the company’s growth.