Smart Investments for Young Professionals

Smart Investments for Young Professionals

Young professionals and individuals who are new to investment would be glad to know how to make smart investments that will yield handsome results. Here, we have provided some tips on making smart investments according to the level of risk encountered.
As young professionals, you are in a sound and really great financial situation. You are young, earning a good paycheck and to top it all, you don't exactly have any substantial liability. So what is it that you can do with the piled away cash in your bank. Well, my recommendation, blow and enjoy some and invest the rest.

While making any investment, there are three crucial things that you need to consider. These include the following.
  • The return on investment is one of the most important feature of any investment. The difference between the total amount invested and total amount returned, and the percentage rate of the same. The rate of return on investment is this very percentage. Now obviously, the better the rate, the better is the investment.
  • The period of the investment is also another very important aspect of assessing any investment. In such a scenario, the lesser the time the better. However it is a general trend of the industry that for good rate of return the time involved is quite prolonged, which in some cases may stretch beyond a decade. A high return in a short time period is usually achieved in investments such as gold, silver, stock, shares bonds and other kinds of securities that you can trade on your own.
  • Lastly, the safety and security of the investment should also be taken into consideration. 401 (k), IRA and other such government provided investment channels of course, provide you the safest investments. There are also some channels such as life insurance and fixed rate annuities which provide equally stable and assured returns. Shares, gold, silver, bonds and other stocks and money market instruments do not provide such safe and secure investments.
There are several other things such as the bearish and bullish market trends, the commission on investing, installments or payments that are to be made per year, terms and conditions of the investment options which you would consider while investing.

High Risk Investments

The first category of smart investments for young professionals consists of investments which have a high risk levels. You will have to take up a lot of research and reading, and also analysis on your own on almost a daily basis.
  • Stocks: Stock investments are rather risky if you are doing them on your own. However a daily research and analysis and a regularity in updating your own knowledge will help you to purchase stock, bonds, securities, options and other such investing instruments of different companies. The key to success is purchase at a least possible price and sell at the highest possible price. The problem is what if you are unable to do so and miss the appropriate sell and purchase, price and time? Well, that's exactly the risk on which you would be gambling. Hence the need for the keen research and analysis, which would help you to get a maximum returns.
  • Gold and Silver: Purchase of gold and silver certificates and physical bullion both, can be undertaken in a manner similar to that of stocks. Actually, such investments are a bit safer as the prices of gold and silver are always on the rise in the long run, and if you keep a watchful eye on the graph then you can sell off the investment at a handsome profit.
  • Commodities, Forex and Options: Trading, foreign exchange, commodities and options is quite similar to share and stock trade. However one needs to bear in mind that the actual research and analysis and the trade execution part is a bit more difficult than ordinary share trades.
Medium and Average Risk Investments

The following are the investments which are denoted to be average risk investments, that is, the recovery of all the invested amount, plus about a 5-7% of return on investment is assured. The remaining returns are based upon the based upon the performance of the portfolio. These are the most recommended investments for young professionals. Take a look...
  • Variable Returns Avenues: Some Collective Investment Schemes (CIS), mutual funds, variable annuities which have a guaranteed return clause have a good initial yield of 5-7%, which is assured. The remaining amount is decided upon the performance of the portfolio and the general market and economy.
  • Managed Accounts: Financial institutes run and operate Money Market Accounts and Systematic Investment Plans (SIP) which have conditions similar to the variable investment. The advantage of such accounts is that there is a complete flexibility of the periodic (annual or monthly), installments which need to be paid. Installment, after a period of time can also be zero with the following condition attached to it. The rate of return on the investment diminishes as a result a zero installment.
Safest Investments

Now there are some investments which are the safest and highly secure even with respect to the rate of returns. Some of these investments in fact, are guaranteed and used by the government.
  • Governmental Investments: Bonds and investments by the Federal government and the Federal Reserve or municipal and state bonds are certain prominent examples of such investments. The rate of return and the safety of these investments is completely assured.
  • Government Accounts: Some government monitored accounts such as the IRA, 401(K) and even your Social Security contributions in the form of taxes are very safe investments.
  • Life Insurance: This is the most important of all investments. There are two important advantages and merits of this investment. One you get great returns of about 10-15%, on the installments that you make, another added perk being that the returns start about 2-3 years after you take the policy. The important benefit is that the financial well-being of your family is ensured.
Now the point is, how can certain investments become smart investments. Simple, divide the amounts that you are going to invest, in proportions. The best gamble is to invest about 20-25% of your income into the said channels of investment. Either ways you can allocate 30% to the medium risk investments, 10-20% for the safest and the riskiest ones. It all depends upon your requirements. Also I would recommend you to consider some options such as real estate as it would serve to be a great investment and also as a security.