Passive, Active Or Creative? Choosing The Right Investment For You

If youre a good money manager, you should have a certain percentage of your monthly earnings allotted for savings

. Youll never know what emergency may crop up which would require you to dip into this savings account so it always pays to be prepared. But what if you would like to double your money, or at least make it earn a certain percentage of interest? Although you can always keep the savings that you have in a typical bank account the annual interest rate that it will earn is very low.

An excellent option would be to invest your money in a financial product. Through it, your initial investment will earn a certain percentage as profit over a period of time. Although there are certain risks associated with some types of investment products, you can actually minimize these and earn as much profit as you possibly can.

What are the Three Types of Investing?

If you have no experience whatsoever when it comes to investing, there are a few basic things that you need to learn. Generally, there are three types of investing that you can go for which include:

Active Investing

As the name implies, active investing requires you to take an active role on the tasks involved in the particular investment vehicle that you chose. Lets say that you chose to put your money on stocks. Since this is a type of active investing, you would have to decide when to buy or sell shares, analyze the market and do all the tasks associated with handling this type of an investment product. Some of the examples of active investing are shares, futures, options, currency trading, property trading as well as buy-and-hold share portfolio building.

Passive Investing

With passive investing, you can hand over the tasks of managing your investment portfolio to a fund manager. Also called an investment manager, this is a professional who is already knowledgeable about the stocks industry. By simply handing over your investment money to the fund manager, he or she can now make decisions as to how the funds will be invested. Another type of passive investing is index funds.

As compared to buying and selling stocks, index funds simply involve buying a particular index in the market. If you bought the A1 index, for example, your index fund will imitate the performance of the A1 index and you will own the same stocks that it has. This does not require an in-depth knowledge of stocks, index funds and other investment options that is why a lot of beginner investors go for it. Savings accounts, property trusts, mutual funds and government bonds are the other examples of passive investing.

Creative Investing

Finally, those who are already experts in the type of investment product that they are dealing with may branch out to creative investing. Property development, business renovation and new product development/marketing are examples of creative investing.

No matter which type of financial product it is that you end up choosing, whats important is to know its ins and outs before investing your money. This way, you can minimize the risks associated with it and boost your chances of earning a significant profit.

by: Benjamin S. Gregersen

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