Ways of investment

Today I am going to share my view regarding investment option and its application. So whenever you have money in your hand to invest you must think Where to invest? How to invest? Such thinks will definitely come in your mind. So, the answer may be…

The stock market I think the first option people think of when they have money to invest.It includes buying stocks or mutual fund. The intention is very clear that to buy at low price and sell it at a higher price .But it needs patience as you have to wait for the price to rise. You may have to face loss as the price can fall. So there is a chance of heavy loss due to the fall. Whenever you are going to invest it needs to be kept in your mind that can lose all your hard earned money.

There are basically three types of investments:

1. Ownership investments: This includes ownership of yours in full or part, depending upon your investment.

2. Lending investment: This means you are lending your money to a company and the company will pay you back with specified interest.

3. Cash equivalent: It can be converted into cash easily such as mutual funds savings account.

There are some basic things to be considered before investing:

• Keep aside your money each month for investments.

• Keep this thing in your mind that you have to allow your money to grow. So don’t expect positive result over night.

• Try to reduce or avoid paying sales commission as it will cut your return on investment.

• Don’t sell your stock immediately if there is a fall in the market .So, think long term and wait for the perfect time.

Keeping the above things in mind now the question arises where and how people can invest their funds in order to get optimum return out of it, which means how to invest in securities to get the maximum benefit. As I suggested you before when you are investing in stock you should have patience. There are different ways of investment and every option has its pros and cons. So the ways that you can invest in stock.

Common or preferred stock:
The simplest ways of investment is buying of share and holding it for the long time in order to allow the money to grow. As a first time buyer you should buy common stock of minimum risk. If the company can grow then your money will also grow and if the company shrinks then your money will also shrink. So you have to keep close eye over the position of the market movement.

Stock option:
The next way of investment is stock option. As an investor you will have that freedom to buy or sell the stock as this option will provide you the right to buy or sell the stock or security on or before the given date. Normally it has short duration.

Leaps:
Leaps is kind of option that does not expire within a shorter period of time as stock option. Generally it is of 1 or 2 years.

Option spread:
It is basically the combination of option, stock and leaps. If you buy a stock and sell call option on the stock then it is called a covered call, an option spread strategy.