There are plenty of ways to invest money. Some are less risky others more. Learn best practices for increasing your capital.
How to invest money? Saving account
The basic tool for investing company money is a savings account. Its advantage is a simple establishment procedure, sometimes even possible online. Transfers are made by the account owner himself, although of course you can perform a standing order, thanks to which the savings will be systematically multiplied. The savings account gives you options for raising capital when you need it. However, its downside is its relatively low interest rate.
Bank deposits have a higher interest rate. You can choose them when you want to invest money in the long run and they are not necessarily needed. Depending on the type of deposit, they are long and short-term, the longer the deposit, the more often the higher the profit. An interesting option is the so-called investment policies, also known as policies. This is a specific insurance policy, concluded with a life or endowment insurance company.
How to invest money? Corporate Bonds
Bonds issued by enterprises are a much more risky asset class than treasury bonds, bank deposits or real estate. After all, an issuer may be in financial trouble and go bankrupt, which usually means severe losses for its bond holders. Generally, the larger and stable the company issuing the bonds, the lower the risk of its insolvency and the lower the margin it offers (i.e. the surplus over the interest rate on analogous treasury securities or the Wibor rate). Some issuers offer secured bonds (e.g. on revenues or assets – usually on real estate), which reduces investment risk.
In mature capital markets, most issuers have a rating, i.e. a rating of creditworthiness awarded by a specialized rating agency. We divide the bonds into investment grade (from BBB- up) and speculative rating. The risk of insolvency of an issuer with an investment rating is relatively low (just like the expected rate of return), while “junk” papers can tempt with very high-interest rates always a very high risk of such issuer falling.
How to invest money? Shares of non-public companies
Shares and shares in all these companies can be traded on the private market, i.e. off the stock exchange. These transactions take place between interested parties and the price is set individually. There are no quotation tables, recommendations, financial reports, ESPI messages and other such requirements known from the stock market.
Although every adult citizen may enter into a purchase and sale agreement for shares in a capital company, in practice this market is dominated by specialized venture capital funds. Individual investors invest in private assets mainly through such funds. It is difficult to find (and convince) someone to buy non-public securities. From the retail investor’s point of view, this is a barrier to exit – it’s impossible to sell your shares so easily.
