Wednesday, February 6, 2019

Investing in the USA: how it happens

From the abundance of existing in the US investment opportunities can easily get lost. In order not to be trapped, and with the maximum benefit to investing your money, read a brief description of the most common investment options. This will help you choose the most appropriate way to increase your capital.

If you have a certain amount of money and want to multiply it, but do not understand the intricacies of investing, it is best to get advice from a financial planner. It will help you develop a common strategy, identify long-term investment goals, and chart out how to achieve these goals. A good specialist will not offer you ready-made investment solutions for the sake of a percentage of their sale. 

Bank Accounts (Deposits) – Savings Accounts

A deposit account can be easily and quickly opened in any bank. This way of investing does not give you much trouble: the bank itself can transfer part of your money on deposit every month. As for the efficiency of such an investment, it is not very high (charges on deposits are 1-3% per year). However, deposit accounts provide minimal risk of losing money and also allow you to quickly return the invested funds if necessary. Even if the bank "collapsed", which happens infrequently, the state guarantees a return on deposits of up to $ 250,000. 

Certificates of Deposit

Certificates of deposit are similar to ordinary deposit accounts, with the only difference that you undertake not to withdraw the money invested for a certain period of time. For example, a six-month certificate of deposit implies that you should not withdraw money within six months after depositing funds into your account. Since the bank receives an additional guarantee against early repayment, it usually offers slightly higher interest rates than simple deposit accounts. However, it is also not prohibited to withdraw money ahead of time, although there is a certain fine for this. As with conventional deposits, the risk of losing money is also minimal. 

Government securities

Investing in government securities, until recently, was also safe. The US government spends more money than it receives in taxes, and therefore it is forced to borrow the missing funds. When you buy government securities, you lend your money to the state for a while. This money is not taxable, so this way of investing is more profitable than bank accounts.

There are several types of government securities. Treasury bills have a short maturity of three, six, or twelve months. The maturity dates of treasury notes vary from 2 to 10 years. Long-term Treasury bonds have repayment periods of up to 30 years. Treasury securities can be purchased at branches of the Federal Reserve System. The interest on government bonds is 2% -5%. 

Money Market Deposit Account (Investment Account)

You can open an investment account in a bank, but this is not the best option. In most cases, it is better to apply to an investment fund. This will allow you to get higher percentages. An investment account is a fairly reliable means of accumulating capital since your money is sent by the fund to safe investment objects, such as government securities. However, compared with direct investment in Treasury securities, the reliability of funds is considered to be lower. 

Mutual investment funds

There are thousands of mutual funds on the market. As the name implies, mutual funds work with cash contributed by a large number of investors. The fund directs this money to various investment objects, ensuring the diversification of deposits. Mutual funds are managed by a team of experts who seek to place the funds raised in the fund in the most profitable way, seeking maximum profit. Each mutual fund has its own investment direction. One fund can focus on Latin American companies, the other - on firms of new technologies. Accordingly, different funds have different degrees of deposit reliability. Therefore, it is worth paying attention to the results of the fund's work in the past, as well as to the area of ​​investment in which a particular fund specializes.

Since mutual funds invest in stocks and bonds, they put investors at higher risk than all the previously listed investment options. That is, there is a possibility of losing money invested in a mutual fund. But mutual funds, as a rule, provide higher returns, especially in the long run. The fund can invest in hundreds of different companies, and this significantly reduces the risk compared to investing in a single company.

Buying a share in a mutual fund may require payment of a brokerage commission. If possible, look for mutual funds that do not require a commission fee (no-load or no-fee fund). 

Stock purchase

A far more risky investment option is to buy shares in a separate company. Although it can make a profit, it is not worth investing all your capital into individual stocks. Before buying stocks, consider whether you should use the services of an experienced stockbroker. The broker will tell you which stocks to buy and at what point to sell them. He can also carry out exchange transactions for you. Naturally, for a fee.

With the development of the Internet, many people have been able to independently buy and sell stocks on special websites. You can easily register for any of these online services if you have a bank account and social security number. For an additional fee, you will even be given the opportunity to communicate with a stockbroker. Online exchanges provide good tools for analyzing market conditions. However, if you are new to the market and make decisions without a broker’s hints, you significantly increase the risk of losing your investment. 

Investing in US Real Estate

The United States is a country of immigrants who have succeeded. Buying residential and commercial property by investors outside the United States has always been an interesting business, involving both the possibility of high income and pitfalls. Foreigners can invest in almost any American real estate - in houses, apartments, commercial property. Of course, we recommend consulting with professionals located within the United States and the territory where you are interested in investing.