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A Young Entrepreneur’s Guide To Short-term And Long-Term Investing

As a young entrepreneur, you might be more focused on your business or marketing strategy. But one thing you shouldn’t be missing out on is your investment strategy. Investing your money is as vital as learning how you can operate a business. In fact, it’s critical that you know how you can make your own money work for you because you even have the skills to do the same for your company.

If you’re still not investing, this is your sign to start now and take charge of your financial security. In this guide, we’ll focus on the best short-term and long-term investments that you can begin with.

1. Savings accounts

Even the most successful entrepreneurs start with growing their savings accounts. If you’re still in the initial phase of being one yourself, it’s best to focus on your personal goals first and having multiple savings accounts is a big help. You can start saving for retirement, emergency fund, big personal purchases, or even a startup fund for your business.

This is a better alternative than holding all your money in a checking account. Find a bank that offers the highest interest rates. Typically, digital and online-only banks provide up to 2% per annum. In general, a savings account gives you up to six fee-free transfers per statement cycle.

2. Money market accounts

Known as a type of bank deposit, money market accounts are available at banks or credit unions and are also interest-bearing. Typically, these accounts earn higher interest than traditional savings accounts, but also demand a higher minimum investment as well. Still, it’s important to note that like savings accounts, the interest rate isn’t as high as other types of investments.

Money market accounts are deemed to be ideal for short-term savings since their risks occur over time. Its average interest rate might make it difficult to keep up with the inflation if you’re thinking about the long term. Money market accounts are also highly liquid like savings accounts.

3. Cash management accounts

Unlike savings and money market accounts that are offered by a bank or credit union, cash management accounts are mostly issued by other institutions like brokerage firms. Generally similar to a standard checking account, cash management accounts come with a checkbook, a debit card, and online payment services. Most of these accounts also have a higher interest rate than conventional checking accounts.

It’s important to note though that cash management accounts are more beneficial for investors who already have an account at a brokerage company. If you’re planning to invest a part of your income, you can only manage your investment accounts and personal finances at one institution. Nonetheless, such an account type is great for maximizing investment profits and managing investment cash flow.

4. Real estate investment trusts

Another attractive investment worth considering is real estate investment trusts (REITs). Basically, REITs make money by managing properties and financing real estate mortgages. It operates in different sectors including malls, data centers, hotels, retail, apartment buildings, single-family homes, and even warehouses.

Opting for such investments can potentially provide you with high dividend yields, property diversification, and no management worries. In order to start with a REIT, you’ll need to buy into the trust to have a share in the profits or ownership of the underlying real estate. Given its performance and income history, this investment is a great option for creating a well-balanced portfolio.

5. Bond funds

Whether it’s an exchange traded fund (ETF) or a mutual fund, such fund contains several bonds from different issuers. Each type of fund is categorized based on a number of factors such as the issuer (federal government, municipality, or corporate), the riskiness, and the duration of the bond. Some types of bonds that you can choose from include savings bonds, treasury, corporate bonds, mortgage-backed securities, and municipal bonds.

In terms of investment portfolios, bonds make a great counterpart to stocks. Stocks, even though tend to provide higher returns, are way riskier and unpredictable when it comes to knowing the best to invest. Bonds, in general, offer diversification, as well as a higher degree of security and relatively predictable returns. This type of investment is ideal if you want something that’s low risk but is likely to offer regular interest payments or steady income.

Take note though that it’s not necessarily a requirement to start each one of these short-term and long-term investments. But if you can work your way one step at a time, you’re surely setting yourself up for financial freedom. The Best thing is that having these multiple streams of income can help you fund your future business venture.

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