What’s The Best Investment? Hint: It’s Not Your House Or Your Car

Posted on Dec 9 2013 - 10:56am by Ian Elbanbuena

Funds

We’re almost nearing the end of the year, a highly anticipated moment for most employees because of the year-end bonuses they’ll be receiving from their companies. As such, most people are already trying to think of the best types of investments they could pick. Today, let’s look at some of the common things people invest in and find out if each one is really worth the money.

Car

Possibly the most common investment to aspire for is a car. Having your own car means no more rides on public buses. No need to put up with traffic on the main road any longer, or with slow drivers or annoying people on the bus who yap too much with their giggly pals. A car is also more convenient when you need to go around with heavy bags. With a car, you can bring those bags anywhere without having to worry about cutthroat cab fares or inconvenient bus rides.

Although having a car gives you many benefits, it also presents a few problems. One, you have to pay for a downpayment which could be hefty. Another concern is when the car breaks down and you don’t have money for the repairs, so you end up trying to sell it. But what happens when no one wants to buy it? On the other hand, if you decide to rent a car, you won’t have as much freedom with it as you want. Renting cars also cost a lot especially when you have to pay extra when the car suffers any sort of damage while you’re behind the wheel.

House

Another top investment is a house.  Having your own house gives you the sheer freedom to customize the space, to make additions or modifications to the structure or design as you see fit. You can redecorate it every year, paint it with whatever color you want the walls in, and just naturally glow with pride and satisfaction every day because you now have a space in the world to call your own.

But as with owning a car, investing in a house can mean money. Plenty of it, especially now that real estate owners are over capitalizing on prime locations that are near popular work areas, malls, and hospitals. If you insist on buying one—without giving any real thought to the planning of it—you could end up paying for the house for the rest of your life. You probably won’t get to enjoy spending whatever you earn because a sizable portion of it will just be spent on the house. It’s not a comfortable set-up to imagine. And there are also yearly house repairs to consider. Those are a lot of costs when you buy a house so if you’re not ready for one, better think again.

Mutual Funds

As mentioned, investing in a house and a car is expensive and both fail to guarantee any sort of profit or returns because you’re not sure about who exactly will buy or rent your house/car, not to mention the question of upkeep: if you can keep the car or house in prime condition. As such, it is important to invest in things that can earn you profit and add to your current income. One of these investments is mutual funds. Mutual funds work by gathering the funds of hundreds of investors and investing them in companies selected by a fund manager. When your fund performs well, you, as well as your co-investors and your fund manager, benefit and earn good profits. Another good thing about mutual funds is the fact that the risk is low as opposed to investing in stocks or bonds. Some mutual funds offer a fixed amount of earnings but this is at a very affordable minimum compared to stocks. Examples of these are investing in government agencies. Meanwhile, if you invest in mutual funds that invest in private companies, you increase the probability of higher returns and profits, but in the same way, also increase the risk of you losing money when the companies don’t perform well. But of course, the risk factor for mutual funds is still nothing compared to the risk you take in investing in stocks. Another plus for mutual funds is that you may withdraw your money after the minimum time imposed by the mutual fund company, for instance, 6 months. However, by withdrawing your money within the minimum time frame, you won’t get to gain any profit from the account. The longer your account stays open with your funds, the more chances it will have to earn a measure of profit, depending on how companies invested in the mutual fund perform.

Bond Funds

You can also invest in bond funds if you want to earn money. Bond funds can provide you with higher interest rates than when you deposit at bank accounts, certificates of deposit, and money market funds. Bond funds have the advantage of cheaper share prices as opposed to investing a big amount of bonds. Because of this, your risk is also reduced. Another benefit of going with bond funds is that, just like with mutual funds, bond funds are managed by a fund manager with enough experience in handling the funds, instead of having you study how bond funds work so you can do it yourself. Bond fund investors who want a more regular income from their investments may also be happy to know that bond funds offer monthly gains. The disadvantage with bond funds is that you have to pay high fees for fund management.

Now that you know the different types of investments available together with their advantages and disadvantages, would you still like to live the dream of owning a house or a car? Aside from these, people often go for personal insurance plans too since insurance plans offer value for everyone. Who doesn’t want to be financially ready for when something happens in the future? Diversify and invest in funds that you may have overlooked and see if you can get better profits in the long term. After all, if everything works out great with those funds, you’ll probably get the car or house of your dreams—probably sooner than you think.

Photo Credit: Flickr/Ken Lund

About the Author

Ian G. Elbanbuena is an online education advocate and a content contributor. He’s representing Paradigm Global Education Management Ltd (PGEM) He’s main vision is to improve lives of individuals through online teaching and study programmes. He also help in giving hope to students who want to come up with better career and college experience through SAT/ ACT Training, study programs, university counseling, tutorials and corporate advisory services.

  • Alex Rodgers

    Well, i have been saving money for my kids in a mutual fund, and so far I think even without Financial Aid at least one of my kids will be able to go through college for a year or two.