Is The S&P 500 A Stock Or A Mutual Fund Best Place to Invest Money

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Best Place to Invest Money

The best place to invest money really depends on the individual doing the investing. To determine which place to park your funds depends on how much risk you can handle and what type of time frame you are working with. This article will describe a few low risk options for investing funds along with a few high risk options for investing.

If someone asked me what the best place to invest money was, I would present them with a few different investment strategies and explain the expected return and the risk of each of those investments.

For someone who is very risk averse (one who avoids risk), I would recommend a fixed income security or a money market account. A money market account is similar to a normal bank account except it pays a higher interest rate. ING Direct offers money market accounts and sometimes offers a sign-up bonus. The interest rate from these types of accounts are normally around the rate of inflation.

For someone who can accept a moderate amount of risk, they should consider an index mutual fund. An example of this would be the Vanguard 500 mutual fund. This fund has extremely low fees and is a basic copy of the S&P 500. The reason this carries moderate risk is because it is a diverse mix of fairly conservative stocks. This specific fund has an average annual yield since inception of 10 percent.

For someone who can accept a high risk, they should consider trading individual stocks. This option takes a great deal of research and a strong heart. Stocks can jump or crash 20 percent or more on a single day. If you are not careful it can turn into a form of gambling. There are many online stock trading brokers to choose from (Etrade, Charles Schwab, Trade King, Sharebuilder.com). The key to success in stock trading is research, have a strategy and don’t emotionally invested in a certain company.

If risk doesn’t matter at all, there is also the Forex market. This is the foreign currency exchange. In this type of trading, you can open an account with a broker who will provide you a margin of up to 200 times your original investment. Small swings in currency rates can lead to huge profits, but it can also wipe out your entire investment in a matter of seconds. For a comprehensive guide to investing in the Forex markets see http://www.babypips.com. It should be noted that most traders recommend using a practice account for at least six months before deciding if the forex market is right for you. To sign up for a practice account see www.forex.com.

The most important thing to think about before you begin trading is what you can afford to lose. If you are working with funds that your family will need in the near future, stick to something safe. It will not provide the return of stocks, but it will also not wipe out your family’s quality of life.

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