Types of Investments

Types of Investments

Real Estate:

 

Real estate is a tangible asset that means one can see and experience the property.

 

If you read any books related to personal finance, you will get to know the importance of real estate investing. Most of the authors of such books are from the United States, and the US’s real estate market has been giving consistent returns for a long time.


The thing that matters the most is liquidity. It’s not easy to buy real estate property. One should have enough amount of cash to acquire a property. One of the most important things in real estate investing is the LOCATION.

 

No matter how expensive the property is, if the location is not good, you will not get higher returns while selling.


Many times it is not even easy to sell property. That is the primary reason real estate investment is not ideal for the lower-middle and middle class.

If we talk about returns in real estate, in the long run, like 10,15,20 years, one can expect a 8.6% return in an average location in the USA.

 

If the location is premium, you may expect a 12-13% return in the long run. Also, many people have made millions from buying and selling real estate properties. In such cases, there is always a high-risk and high-return factor. If you are interested and passionate about real estate investment, then you should start an investment in this field.

 

Bond and Debt Funds:

Bond investments are less risky, and hence it gives a lower return. Most of the time, the return is fixed. If the return is not fixed that it is easy to predict the returns.


Bond and debt funds are almost similar. Both contain less risk and stable returns. One can invest long term debt funds to obtain stability in his/her
portfolio. Basically, when we invest in a bond or debt funds, we eventually invest in government security, treasury bills, and money market, which are completely risk-free because they always remain in government observation.


Debt funds and the bond can give returns up to 2-3%. It depends on the selection of debt funds or types. There are many types of debt funds, such as long-term debt fund, short term debt funds and ultra short-term debt funds.


Hence, if we are a conservative investor, bonds and debt funds are a perfect option.

 

Liquid Fund or Money Market Account:

 

Alright, in the previous video, we learn how we can get decent returns by taking less risk.


In this video, we will understand how can we beat the bank’s interest rate without taking any risk. As we have discussed earlier, there are lots of different kinds of debt funds.


Liquid fund or Money market account is also a type of debt funds that mainly invest in the money market and government bonds. The coolest thing about liquid fund is in its name. Liquidity. We can invest anytime and also we can withdraw anytime.


Besides, it provides 0.7% to 1.1% return that is very impressive because there is no risk. For instance, you make $3000 per month, and you are putting all your money in bank. Use financial intelligence and invest in a liquid fund. You will get 0.6% more return compare to the bank. You can withdraw anytime.


When we put money in a savings account, it simply saves our money. Most of the time, banks returns are not even able to beat the inflation rate. That’s the reason when you have some cash, then invest in a liquid fund and get higher returns to compare to a savings account.

 

Here, I have used the word ‘invest’ for the liquid fund. Because it is more than savings. Eventually, money in savings accounts gets depreciated because it does not even beat inflation.


That’s the fundamental reason in the long run, the habit to save money in savings account is actually not good. From the next videos, we will understand the power of compounding and how can we become rich in the long run.