Our financial stability is influenced not only by how much money we have but also by interest rates. If we have borrowed money from banks, our financial situation depends how much they charge us for this favor. For interest rates determine our monthly payments for the whole life of the loan. The slightest difference in rates can either push our payments up or bring them down. The influence of the fluctuating rates can be so dramatic that we can pay thousands of dollars more or less in interest over the loan’s term.
It is thus very difficult to decide what to do with our spare money, when we are paying off loans whose interest goes up and down. We might budget our spending or investments according to the payments towards our loan we have been making for the last few months. But then unexpectedly, the rates change causing us to pay a different amount and, as a corollary, thwarting our plans and even damaging our business. This is not a desirable scenario. Aware of the unsettling influence interest rates can have on our lives, we are listing below several areas in which you can invest your money even when you are paying off loans. These areas are high yield saving accounts, mutual funds or ETFs, and real estate. Investing in them requires deep knowledge of the field and good tactics, though some of these areas are easier to understand than others. Buying assets on stock market or purchasing properties might be more difficult than choosing a profitable savings account in your bank. Hence, if you take the hard route, you may benefit from extra help. In case you are toying with the idea to start investing in real estate, check the real estate crowdfunding comparison list, before you make up your mind. You may find useful tips for your future investments on this page.
Admittedly the easiest and the safest way to manage your spare money is to put them in a savings account that will give you good interest rates. True, you will never make fortunes from such investment. But your money will still grow at a steady pace. No savings account puts your money at risk as other businesses do. It is virtually impossible to lose your funds locked in your account. Indeed, if you cannot afford any monetary losses and need a quick access to your money, putting your funds aside in your bank is the wisest option. But if you think that the rates that your savings account offers are not large enough, you can open an online high yield savings account. While your bank will probably give you an average interest rate of 0.06 percent, you can get much higher interest rate of 1 percent with any high yield savings account. The security of this account is as strong as that of your savings account in your bank. You will only gain by saving your money online.
You can also use mutual funds to manage your investments. Mutual funds are a company that invests on your behalf, just as does its technological version called robo advisor. The software making investments for customers is highly popular these days. But if you trust humans more than machines, you will find mutual funds more appealing. As might be clear from its name, mutual funds compile money from all participating investors and then invests them in securities such as stocks or bonds. As an investor, you will need to buy shares from your chosen mutual fund. Your share will represent your part ownership in the fund and the income it will generate. Before you choose any mutual fund, check the company’s history, paying attention to how it performed over the last several years. The only caveat you should mind is that an initial investment in any mutual funds company is high, no less than $5,000. In case you do not plan to invest such a large amount, you can try ETF or Exchange Traded Funds instead of mutual funds, where such a large initial investment is not required. Like a single stock, ETF is traded on the stock market. In other words, far from making a large initial investment, you will be able to purchase smaller pieces of these funds.
Investing in real estate is more complicated than giving your money to mutual funds or opening a savings account. You need much larger amounts of money to purchase property, refurbish it, and sell it with profit. More skills and experience are also required in this business. But you may make money in real estate even without selling property. If you already own an apartment or a commercial office, you can lease it. Alternatively, you can buy commercial or residential property and then rent it. Renting an apartment will bring you a handsome profit, though many people consider being a landlord a hassle.
There are other areas where you can invest money. You can place your money in stocks or bonds. Or you can invest in yourself and have a college degree. If you have debts, you can pay them off, which is in itself a highly profitable investment. But whatever you decide to do with your extra money, it is crucial that you choose the venue that will not suffer from the fluctuation of interest rates.