best investment right now

What is the best investment right now?

Something is happening when it comes to investing money in 2022. More and more people want to take their money matters into their own hands, which is a very good and necessary decision in view of the current low interest rates. This is also shown by a current survey conducted with 1004 people:

However, in order to be able to make a well-founded decision in matters of financial investment, the following question must first be answered: What types of investments are there in the first place?

In this article, together with the experts from VAIDOO, we would like to introduce you to the most common forms of investment and evaluate each investment option so that you can get an idea of your options.

In order to find the “perfect” investment, an analysis of the various alternatives with the help of the Magic Triangle of investment is suitable.

Savings account as an investment

For a long time, the savings account was considered the safest investment. At present, however, there is hardly any interest and in some cases savers even have to pay a negative interest rate.

With the current low interest rate, the only certainty is that your money will become less.

If the interest rates should be raised again one day, however, the savings account is a very safe investment option at least up to an investment of 100,000 Dollar. If your investment in a savings account of a single bank exceeds the amount of 100,000 Dollar, the deposit insurance does not apply to sums exceeding this amount. In such a case, it makes sense to spread the investment amount over several banks.

Daily allowance as an investment

Daily allowance is also a safe investment and generally earns better interest than a savings account.

However, interest rates are currently very low here as well, so inflation will reduce the value of your money over time.

There is no notice period and no specific term for call money. You can therefore dispose of your money on a daily basis.

In case of insolvency of a bank, your money is also protected by the state up to an amount of 100,000 Dollar per institution.

Time deposit as an investment

The time deposit also scores in terms of security.

The return is somewhat higher than with overnight money, but your money is invested for a fixed term.

This means that you cannot access your money for this term.

You should therefore not invest in time deposits if you assume that you might need your money in the meantime.

Real estate as a financial investment

Rented out real estates (= yield real estates) are likewise considered as safe Investment and belong to the profitable investments. In contrast to other forms of investment, the yield here is already significantly higher.

This can be attributed to the fact that an investor in real estate benefits from the principle of so-called “Other People’s Money”. By taking out a bank loan at favorable interest rates, a debt lever is created. This results in a good return on this investment, as less of the investor’s own funds have to be used and the return on equity is therefore significantly higher than with other forms of investment.

Simply put, the real estate investor can make the bank’s money work for him, because the tenant pays back interest and principal.

Real estate should therefore only be purchased as a capital investment, so that the tenant pays back the loan taken out (it is best to make a financing comparison beforehand) and the interest due for you. In this way, it is a safe investment that leads to an attractive return in the long term.

Additional potential lies in the increase in value of a property, which can generate a substantial tax-free profit if the location is chosen well.

Stocks as an investment

Stocks are shares in a company. With stocks, we are moving into the realm of somewhat riskier investments. Stocks are certainly not the logical answer to the question “What is a safe investment“.

You can achieve a very high return with stocks, but you can also suffer a total loss.

The risk can only be reduced if you choose your stocks carefully, diversify widely and have a long-term investment horizon.

If you need your invested capital quickly because of a financial shortage, liquidation is indeed possible, as you can sell your stocks at any time. However, you may have to take a bitter loss when the market is just at the bottom.

As far as risk is concerned, a fundamental distinction must be made between dividend stocks and growth stocks:

  • Dividend stocks usually trade at less spectacular prices because they operate an established business model that has worked for many years, often decades. This fact that less money is put into growth means that more money is left over for dividend payouts. Good examples of this are dividend stocks such as Coca Cola.
  • Growth stocks usually do not pay dividends and instead invest masses of resources in the future of their own business model. These companies are innovative and are traded on the stock markets at high sales multiples.

Overall, therefore, it depends very much on what types of stocks the investor focuses on and how broadly the portfolio is spread.

Bonds as an investment

Bonds are also securities.

With the help of bonds, a government or a company borrows money from investors and pays this money back at the end of a fixed term plus interest.

Even though bonds are considered a safe investment, the risk of corporate insolvency or government bankruptcy remains.

The return here is slightly higher than the fixed deposit level, but depends on the reliability of the issuer. For example, if you want to lend money to the US government by means of a bond, you even have to pay a negative interest rate due to the government’s high credit rating.

Funds as an investment

A fund company takes the money of several investors and invests it bundled in different assets.

Since this form of investment does not put all its eggs in one basket, funds are less risky than individual stocks, but there is still a great deal of risk involved.

Funds can achieve an acceptable return – despite a high fee for active management by the fund company.

ETFs as an investment

ETFs (Exchange Traded Funds) are basically also funds. However, ETFs are not actively managed, as is the case with the funds mentioned above.

As a result, the fees are very low.

ETFs track indices, such as the Dax or the S&P 500. If the index performs positively, the ETF also performs positively.

The risk is spread and thus kept within limits.

When reading these short descriptions, you will have already noticed that in most cases you have to decide between security and a high return. For the most part, only real estate fulfills both criteria at the same time, which is why we have specialized in precisely this form of capital investment.

However, if you want to invest your money properly, it may also make sense to make the decision dependent on the time horizon.

Investing money with small amounts

You don’t always have a large sum of money ready to invest diligently. Don’t worry. There are ways to invest with small monthly amounts, too.

A monthly savings plan:

You set up a standing order so that each month an amount you specify goes into a savings account or custodial account.

There is now a very wide range of savings plans.

For example, you can invest in ETFs for 25 to 50 dollars per month. Nevertheless, there is a risk of incurring losses here.

Rented property as an investment:

This may come as a surprise to you. We find that most people assume that buying a property is a high monthly burden. However, this is only true for owner-occupied property.

With investment property, the property is rented out, so for the most part the tenant pays off your financing installment.

This gives you a monthly cash flow of -50 to +50 dollars.

And after the tenant has paid off the property, you own it.

The long-term cash flow then corresponds to the rental income – like a second pension.

Conclusion: What is the best investment?

Ultimately, this is a subjective question that you can only answer yourself. To do this, you would first have to ask yourself the following questions:

  • Do you want to invest your money for the short, medium or long term?
  • Do you attach more importance to security or to a high return?
  • Do you want to be able to access your money flexibly?

For us, real estate is the perfect investment because it combines security and return. As we noted above, savers are currently receiving very low interest rates.

But if you change your perspective for a moment, you will see that little interest is paid on loans as well. The interest rate on an average construction loan is around 1.2%.

Combined with no or very low monthly charges, an attractive return in old age and a high level of security, real estate is therefore the best way to invest your money in a return-oriented and secure way.

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Christophe Rude

Christophe Rude

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