Allocating Your Investment

Invest in stocks

When you purchase shares, you become a partner in a limited business, and all shareholders jointly own the firm. The shares are frequently a source of finance for a firm that wants to market its shares and bring in new owners.

The corporation only earns money when the shares are sold for the first time on the stock exchange. In general, stock exchange trading with used shares has little impact on firms other than the fact that the share price, in the long term, might affect corporate value and, therefore, the ability to borrow money and sell shares at a higher/lower cost, and so on. 

Always do your analysis before buying shares

When investing money in a stock, always choose companies you think will profit and do well in the future. To create an image of the company, you can go through the company’s historical results and look at future analyzes for the company and the industry in which the company operates. Based on this, you make your analysis that forms the basis for your investment decision.

Invest in mutual funds

A fund collects different types of securities, usually shares. When you invest money in a fund, you own fund units, i.e., part of the total assets in the fund, but you do not own any individual shares and do not become a partner in the companies in which the fund invests.

If a fund invests in shares in a company, you become an indirect owner in all these companies, but instead of buying shares, you leave the task to the fund manager. The goal is, of course, for the money to grow in the long run. Read more about funds here.

Invest in gold and commodities

Traditionally, investing in commodities has been an excellent way to guard against economic downturns. Many entities tend to maintain or even rise in value when the stock market is turbulent. 

Investors, therefore, tend to have a base of precious metals in their portfolio to guarantee that the portfolio will never be completely useless. A good guideline can be that precious metals should make up around 10% of the total value. Here you can learn more if you want to buy and invest in gold.

Most often, the metals that are preferred are gold and silver, but gold has a unique position for several different reasons:

• Gold is present in a more limited amount in the ground than silver, which means that gold has always resisted inflation. That is – gold does not fall in value in the same way as money.
• Gold does not lose value when the rest of the economy is doing poorly. On the contrary, gold tends to increase in value during times of crisis and therefore balances up a portfolio when other investments are declining.

Invest in exchange-traded funds (ETFs)

An exchange-traded fund (or ETF from the English Exchange Traded Fund) differs from traditional funds, among other things, because they are listed on the stock exchange and can be traded several times during the same day. 

It also means that ETFs are traded and priced in real-time, while a traditional fund is priced once a day. ETFs usually follows the development of an underlying asset that can be, for example, a commodity, an equity index, or a currency. 

The management fee is usually also lower than with actively managed equity funds. On the other hand, a brokerage fee generally adds for trading, just as for shares, which rarely arises when buying traditional funds.

Invest in bonds

Bonds are a form of loan that states or companies sell to investors instead of borrowing money from a bank. Therefore, when you buy a bond, you become a lender to the person who issued the bond. The state or company then pays interest to you as a lender during the bond term. 

The great advantage of bonds is that when the loan matures, the investor usually gets back 100% of the amount, which means that bonds are generally considered safe and stable investments.