Have Money? Where Do You Invest it?

There are many options available when it comes to investing hard earned money. Let’s look at some of the alternatives and how they stack up against each other.
First, an ultraconservative approach would be to lock up a stock pile of cash in a safe or in a safety deposit box at a bank. The money might be safe from market fluctuations but is it really safe? Obviously there is no interest being earned. Actually the value of the money would be declining when the rate of inflation is factored in.
Another alternative is to put the money into a bank CD. At the time of this writing, bank CD’s are paying an interest rate ranging from.57% to 1.59% for a 6 month CD and.5% to 2.09% for a 1 year CD. Using the rule of 72 to determine how long it will take to double an investment and figuring on the highest rate of 2.09%, it will take 34.4 years to double an investment placed into bank CD’s. This is without factoring in rates of inflation. Once inflation is considered the actual return on investment is most likely negative.
Investing in the stock market is another option. This investing strategy puts money at risk without any recourse. If the stock market goes down, the individual investor has no security to protect the initial investment. However, a good and calculated investment may offer high yields. Historically from 1926 to 1999, Real Estate Articles For Agents the common stocks of the S&P 500 have had an 11.3% rate of return. However the S&P 500 performance for the last 5 years, as of Oct. 31, 2009 has only been.33% according to Standard and Poors. The volatility of the stock market is not for the faint of heart when it comes to investing hard earned money.
Real estate is the option that this author likes most. Real estate is a hard asset and the investment is backed by this asset. However not everyone is of the mind set to be a landlord or to deal with the day-to-day activities required in the process of buying, renting and selling real estate. There is hope for those investors looking to invest money in the real estate market without the need to be intimately involved. This is accomplished through investing in real estate via private lending.
Private lending in real estate is when one individual lends another an amount of money to execute a real estate transaction. The investor is then given a promissory note and a mortgage as security protecting their investment. A typical rate of return in this scenario is between 8 and 12% and in most cases this rate of return is constant throughout the length of the investment. Using the law of 72, a 12% return will double in value every 6 years. The constant rate of return is one of the reasons this type of investment is so attractive.
Due diligence is required regardless of the investment. When evaluating Bank CDs, determine the viability and health of the bank even though CDs are protected by the FDIC. The financial health, balance sheet How To Sell A House By Owner Paperwork and debt position of companies should be analyzed when considering stocks. Finally, the loan-to-value, appraisal and rental rates for real estate should be verified when considering a private loan.

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