If you have some extra cash lying around without doing much except existing, you can put it into work to make some extra money by depositing it in an institution that accumulates interest. There are different things you can push that money into, like stocks, bonds, mutual funds, online banking accounts, real estate and a plethora of things that take in a deposit and adds interest. A good thing about investments are that no matter how long it takes, you always get your original principal amount of money back.
The adding of the interest is called ‘compounding interest’ and is the main tool with different rates in different places that adds that extra money during time into investments that you put in. In simple terms, if you keep your original principle amount where you have invested first time without taking out the interest amount you gained then within the next year you earn more as the principle amount is bigger than the first time you invested as the re-investment will count the added interest as your principle too. That is why people usually advise to keep your principle investments for longer periods of time to generate more money. But for those who want to keep a chance of taking back the money in case of an emergency or so, short term investment options are the key.
A bond is called a debt investment as it requires the investing person to loan the money into an institute in debt, usually a corporate or governmental institution for safety, for a finite period of time. During this time period the interest rate can be either fixed or varied and depends on the investee. Bonds are a common type of funding for projects and programs for companies, universities, municipalities, governmental departments and states. Usually the call for bonds are publicized and can be seen in newspapers, online websites of investee, and websites for bonds but there are some which are acquired over the counter (OTC) that sometimes use a dealer network.
These are the most famous types of investments known by people and one of the types that gives control to the investor over the investee’s assets. Whether it is common stock or preferred stock, the investor is classified as a shareholder or part owner of the institution or company that is the investee. The amount of control and ownership is based on the amount of shares that the investor has and these stocks usually outperform all other types of investments in the long period. Common stocks give the investor the right to vote and receive dividends while preferred stock does not have voting rights but gives a higher degree of claim on the assets and revenue of the investee.
• CCE/ Cash and Cash Equivalents
These are the assets of an investee that can be converted into cash at a moment’s notice. Money market holdings, short term bonds, commercial paper, bank accounts, treasury bills are some types of cash equivalents that can usually be found in a company. CEEs can be classified as short term investment options with high returns if they have expiration dates of around 3 months or so, which is the usual case. Investing money can sound like a harsh punishment to some but it is the best and safest bet to generate money from any surplus you have on your account.