Editor’s note: This article was first published in May 2010, during the economic crisis; the deposit amounts and terms it describes, from €600 to €30,000 and from one month to five or ten years, reflect Spanish bank offers of that time.
Update: We revisited this topic in April 2012 with an article that explains the most profitable types of investment for each kind of investor. You can read it here:
Profitable investments for small savers and small and medium-sized investors
Even in times of crisis you can make money by investing, but you need to know where to invest. Following Robert Kiyosaki’s doctrine, don’t work for money, let money work for you, we are going to look at the safest areas to invest in right now.
Before anything else: any investment expert will tell you to always diversify your investments.
First, let’s look at the safest and most profitable investments:
- Government debt: treasury bonds and bills. They don’t require a large investment, and repayment and interest payments have always been guaranteed. When we invest in a bond, it is as if we were lending money, and that loan pays us interest every quarter or every six months. If you can afford to invest money you won’t need for a couple of years, the profits are practically guaranteed.
- Bank deposits: the advantage of this type of investment is that you can tailor it however you like: the amount, the term, and you know in advance what interest you will be paid when the deposit matures. It is a safe investment. The longer you leave your money in, the higher the rate they will pay you. Amounts range from €600 to €30,000, and terms run from one month up to 5 or 10 years. If you won’t need the money during the term you choose for your deposit, I recommend this option. Your money will earn more than it would under the mattress. It will be working and generating profits for you.
Then there are other, more variable investment options. They may not guarantee a return, but that doesn’t make them any less interesting:
- Investing in a company or business: before investing this way, study the company, study its business plan and look at it through a customer’s eyes. It is a risky decision, but it can be very lucrative. One way or another, you can become a capital partner in the business. Get good advice on how to get the most out of this kind of deal.
- Investing in the stock market: the oldest investment, the most lucrative, and the one that has ruined many people. To get started, you need to forget many of the myths around it. You don’t need large sums of money, and as a rule it is very hard to lose everything you invested, unless the company you invested in announces it is going bankrupt.
The drawbacks of this type of investment include:
- Uncertainty about whether you will make a profit or a loss.
- You can lose everything if the company goes bankrupt.
- As a newcomer, you will need a professional to guide you, and that professional may turn out to be less professional than you’d hope.
The advantages:
- Contrary to the myth, the stock market can rise or crash, but as a rule it tends to balance out. Those sharp swings are where brokers make or lose considerable sums. That is the game of the stock market, but you, who won’t be investing large amounts of money, will hardly suffer considerable losses.
- Technology lets you buy shares from your own home with very little money.
- As a shareholder in a company, you share in its profits, but not in its losses.
- If you invest in companies that pay dividends, you earn extra money on top of any capital gains.
In short, the first two options are safe and profitable: your earnings depend on how much you invest, you can be sure you will be paid, and you don’t need any advice.
The other two options can make you rich, but you run the risk of losing everything. It is also advisable to get advice from a professional.
Further reading
- Investing in gold
- Investing in mutual funds
- Investing in fixed-term deposits
- Investing in currencies and forex
- Why a new business fails
Featured image: Unknown author, Public domain, via Wikimedia Commons.
