Special to California Business Journal.
Sometimes, taking out a loan from lending companies who provide the lowest interest personal loan and investing the money can be a wise decision. However, there are some investment options that you will have to carefully analyze or you will risk losing money. In this article, we will discuss all the investment possibilities that you can venture to, and how profitable they are if your investments are coming from a loan. Without further ado, let’s start:
As opposed to purchasing a single stock, buying mutual funds allow you to purchase numerous stocks in a single transaction. A mutual fund manager generally selects and maintains the stocks included within a mutual fund.
The manager of a mutual fund generally imposes a percentage dependent service charge when investing in them. In most cases, this payment causes it to be hard for investors to make substantial earnings on their purchases on mutual funds. Additionally, the majority of mutual funds cannot match the earnings that can be gained by trading in the stock market. As such, it is not recommended to invest in mutual funds if your source of investment is a loan.
Bank savings account
Undoubtedly, the investment decision you can go with that has the lowest risk possible is a savings account. Nevertheless, minimal risk also equates to minimal earnings. The risk from investing your funds in a bank savings account is minimal, and as a result, the earnings you will gain will also be minimal.
A savings account is only suitable if you are investing your own money. However, if you are planning to take out a personal loan to invest in a savings account, think twice. You will only be losing money on interests on your loan, and the earnings from the savings account are negligible.
Bitcoin is a very volatile investment choice. However, the increase in value enjoyed by bitcoin is very impressive, to the point where if you invested just a hundred dollars early in its life, it will be thousands if not hundreds of thousands of dollars now. The growth might have staggered now, however it is still promising and it is never too late to invest money in bitcoin, even today. Investing in bitcoin using personal loan money is recommended, however, you must carefully analyze how bitcoin works first. As always, do not go headfirst on an investment that you are not familiar with, especially with the money that you will have to pay back. The potential for profit in bitcoin is high, and you can easily pay back the loan and its interest and still have some leftover money if you do it right.
Debt mutual funds
Debt mutual funds are perfect for people who desire constant earnings. Debt mutual funds are much less volatile compared to bitcoin, and as such, they are not that risky. However, it also means that they have reduced potential for earnings. Debt mutual funds typically make investments in securities with fixed interest rates such as government bonds, treasury bills, commercial papers as well as other instruments of the money market. At the moment, the returns on debt mutual funds are approximately 6.5 percent for 1 year, 8 percent for 3 years, and 7.5 for 5 years.
Real estate property
The property that you currently reside in is for your own use and is never regarded as an investment decision. However, if you are buying a property that you do not intend to use personally, it can be an investment.
The area in which the property is situated is the most significant aspect that will figure out the price of the real estate property, and will also determine the rental income that you can generate from leasing the place. Purchases of real estate property provide earnings in a couple of ways. The first is investment appreciation, in which the property gains more value over time, and renting income made from having tenants. Real estate is a highly recommended investment since the potential for profit is high. You might want to hire a property manager if you are not familiar with the ins and outs of being a landlord so that you can further reduce the risk of losses.
Stocks and shares are the investment of choice by experienced investors, simply because they offer the maximum possible earnings. Also, when considering the long term earnings, the stock market is almost unbeatable when it comes to returning of interest, only beaten by bitcoin in its peak. Having said that, stocks and shares are usually unstable and volatile, similar to bitcoin. The price of stocks can decrease or increase at any given time. Occasionally, stock values can even drop for a prolonged time period. Misfortune or undesirable timing may easily get you into a loss.
However, it is possible to reduce this risk by investing in the long term, since inevitably, the stocks who decreased in value will rise again, unless the company became bankrupt (which will probably not happen on big companies.) For this reason, you should invest only in companies like Google (Alphabet Inc), Apple (Apple Inc.), Amazon (Amazon.com, Inc.) and the likes, and avoid investing in start-up companies if possible. However, this does not mean that you should forgo investing in startups altogether. Sometimes, the biggest profit you can make in the stock market is by investing in start-up companies that became big.
If you are knowledgeable about investing and trading on the stock market, then go ahead and use personal loan money to invest. However, if you are just a beginner, you probably shouldn’t risk it. Yes, the stock market has high-profit potential, however, it also requires you to have a mastery of how the stock market works.
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