Wise Ways to Invest Your Money

These guidelines will help you choose where to invest

Written by Oxana Tsirelman, Staff Writer

Many Canadians are currently struggling with how to wisely invest their money in order to retire with comfort. After all, any avenue is risky since you always have to decide which calculated risk is the best to take.

Try not to forget this fundamental rule in finance: “What you need to do is weigh out the risk versus the potential return. The difference between saving and investing is that investing is much riskier but has a much higher potential rate-of-return.”

One potential avenue to consider is property ownership. After all, most people want to eventually live on their own. If you can retire in a location that does not require monthly rental payments or a mortgage is a sound option. Besides, “if you can earn enough to buy a second house outright then you will be able to live in one and live off the rental from the other.”

Another viable option to invest your money is in pension funds since the money goes directly back to you when you retire. The way it works is that you invest a certain amount from your current income in a pension fund for retirement. However, considering the current collapse of some pension funds, you should exercise caution and consideration if pursuing this path.

[pullquote]Any avenue is risky since you always have to decide which calculated risk is the best to take.[/pullquote]In addition, health insurance is an avenue many Canadians take. In the event of a large medical bill, your house and savings could be required to cover the costs. The savings mentioned above are likely the best way to go, but if you are prospering and can afford to take some risk, go with this option.

Another good option is the Stock Purchase Plans since you are able to invest by little amounts. Investing small amounts of money through Dividend Reinvestment Plans (DRPs) or Direct Stock Purchase Plans (DSPs) enables you to purchase right from the companies rather than going through a broker. Countless companies are offering this option and make it possible to invest as little as $20. Frankly, “basically these investments allow you to reinvest your dividends and slowly grow your investment.”

Lastly, investing your money in index funds works out well if you have several hundred dollars to invest. Basically, index funds finds index like the Dow, the Nasdaq, or the S&P500-an index based on 500 top companies in the main industry sector. Not only that, some index’s like the IRAs let you invest as little as $250! The advantage of this option is that index funds is a low cost option since they find the index for you, which saves you high management costs. If you decide to choose this option, be aware that the two primary ways to invest in index funds are through mutual funds or ETFs, short for exchange traded funds. ToInvestMoney.net asserts that “when investing in an index fund, you should keep your transaction costs less than 2% of the value of the transactions. So if you invest $500, you should ensure the transaction cost is no more than $10.”

These are just some of the wise ways of investing money into your retirement. Before you make your final decision, just don’t forget to do a lot of research!

ARB Team
Arbitrage Magazine
Business News with BITE.

Show more