All your money decisions involve making up your mind as to where to invest your hard-earned cash. Thousands of choices exist but you can cut that number down to just five basic investment opportunities:
Alternatives. This investment area covers a rag-bag of bits and pieces. For some people, alternative investments concentrate on items you can physically hold, such as works of art, fine wines, vintage cars, antiques and stamp collections. You’re taking a big bet on taste and fashion – and you probably won’t be able to cash in quickly.
But for an increasing number of people, alternatives mean hedge funds, which are about as esoteric as investment gets. Put simply, you hand over your money to managers who, by hook or by crook, hope to increase it. You can also count commodities – natural resources ranging from wheat to copper – as alternatives. These are traded on specialist exchanges.
Bonds. A stock-market-quoted bond is basically an IOU issued by governments or companies. Bond issuers promise to pay a fixed income on stated dates and to repay the amount on the bond certificate in full on a fixed day in the future. In other words, you pay the government, say, UK£100, and the Treasury promises to give you UK£5 a year for the next five years and your UK£100 back in five years’ time. Bond prices can go up and down between issue and final payback.
Cash. The safest – your first UK£50,000 in any bank or building society is protected by a government-backed guarantee. You can invest in a branch, online, or by post or phone. In general, the longer you’re prepared to lock up your cash, the higher the interest you get on your deposit. So it’s often an access versus interest choice.
Property. The property you live in is probably your biggest financial project – assuming that you don’t rent it from someone. Property beyond your home can also be a worthwhile investment – but only if you can take a very long term view and factor in costs such as interest, insurance and repairs.
Shares. Shares are what they say they are – a small part of a bigger picture. Buying shares – also known as equities – gives you partial and probably infinitesimal ownership of a company. Shares go up and down – often by big amounts in a short time. And if you back a bad company, you’ll almost certainly lose all your investment.
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Source:http://www.dummies.com/how-to/content/making-basic-investment-choices.html
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