There are an incredible about of ways to invest, and part of the role of investment bankers is to design new ways of being able to gamble on risk.
But, as a home investor, there's most likely three different options you're considering, and I'll discuss these in the following article.
Firstly, there's the well publicized investment in the stock market, and there are ultimately several ways you can do it.
Investing in particular company stocks or commodities, you are betting that the price of the stock will rise.
There are other objectives which might lead you to a different array of stocks however; some stocks have little variation in their price (and therefore you wouldn't want to invest simply to profit on the potential increase of share price) but instead have a substantially higher dividend yield.
As a result, you can invest in what are seen as safer and more well established companies to dampen risk.
The second main way individuals and institutions alike invest is through government bonds.
These are incredibly safe, the only risk being the chance of the country defaulting.
In a first world economy like the US or UK, this would be catastrophic.
Ever heard the phrase 'too big to fail' banded about? That essentially describes these economies, the costs of defaulting or indeed their security rating dropping would have serious ramifications to their domestic economy.
Ramifications would be so serious that virtually any investment you could possibly conceive of would be affected, regardless of their exposure to bonds.
All in all then, bonds make safe bets.
But what about the return? Naturally, risk is inversely proportional to the return you make on an investment: it's underpinned by the simple economics of supply and demand.
You're not going to be made rich quick with bonds, but they could well have a healthy role in your portfolio if you're looking for financial security for the long run.
Last, but certainly not least, are mutual funds.
These essentially do all the informed decision making and hence diversification for you, but obviously at a cost.
This might be beneficial if the mutual fund has a good track record and can therefore justify the expense.
When times are bad however, and there's economic turmoil, it simply might not be worth it for the meager returns made here.
You can be in relative comfort though that because of the hedging that the fund managers do, your money is relatively secure from the commonplace dips and troughs of the stock market.
But, as a home investor, there's most likely three different options you're considering, and I'll discuss these in the following article.
Firstly, there's the well publicized investment in the stock market, and there are ultimately several ways you can do it.
Investing in particular company stocks or commodities, you are betting that the price of the stock will rise.
There are other objectives which might lead you to a different array of stocks however; some stocks have little variation in their price (and therefore you wouldn't want to invest simply to profit on the potential increase of share price) but instead have a substantially higher dividend yield.
As a result, you can invest in what are seen as safer and more well established companies to dampen risk.
The second main way individuals and institutions alike invest is through government bonds.
These are incredibly safe, the only risk being the chance of the country defaulting.
In a first world economy like the US or UK, this would be catastrophic.
Ever heard the phrase 'too big to fail' banded about? That essentially describes these economies, the costs of defaulting or indeed their security rating dropping would have serious ramifications to their domestic economy.
Ramifications would be so serious that virtually any investment you could possibly conceive of would be affected, regardless of their exposure to bonds.
All in all then, bonds make safe bets.
But what about the return? Naturally, risk is inversely proportional to the return you make on an investment: it's underpinned by the simple economics of supply and demand.
You're not going to be made rich quick with bonds, but they could well have a healthy role in your portfolio if you're looking for financial security for the long run.
Last, but certainly not least, are mutual funds.
These essentially do all the informed decision making and hence diversification for you, but obviously at a cost.
This might be beneficial if the mutual fund has a good track record and can therefore justify the expense.
When times are bad however, and there's economic turmoil, it simply might not be worth it for the meager returns made here.
You can be in relative comfort though that because of the hedging that the fund managers do, your money is relatively secure from the commonplace dips and troughs of the stock market.