| For novice investors the task of deciding how to make a sound investment can be a challenging one. With only a small amount of money to start with, how is it possible to make money by investing? Using safe, low-risk investment options maturing within a year, to begin with can create more money for more various options later on.
Diversification — using various investments — is the ultimate aim. Using low-risk short-term investment options, including money market funds, treasury bills, and time deposits, is a way to gradually make money while making an investment, and have the freedom to diversify in the future.
Why money market funds work for beginners
MMFs are an investment instrument that beginners can use to turn a profit. They include safer investments of usually less than one year, with losses being rare. A money market fund takes the diversification of a mutual fund, where a number of different investments are gathered together with the low-risk short-term nature of the money markets. Using almost sure bets, including treasury bills, commercial paper, and banker's acceptances, they are a great investment option for many investors.
Make a profit by making an investment in treasury bills
A treasury bill, or T-bill, is a government issued security, which expires in a relatively short period. T-bills can be bought and held for a period of days, or weeks, up to one year, with the term ending on a specified date.
There is no interest rate earned on treasury bills. Money is made by purchasing a bill at a discount, and afterwards exchanging it for face value on its maturation date. For example, a T-bill may be purchased for $90, even though its face value is $100. Therefore, there would be a net profit of $10.
Secure investing with time deposits
For a certificate of deposit, sometimes called a time deposit, money is invested into a bank. An agreed upon interest is paid for a fixed period. Within that term the money cannot be withdrawn. Banks may offer competitive interest rates, as time deposits need to be competitive with other low-risk money market investment tools. Investing in a time deposit can yield a profit for money that may have otherwise been simply kept in a savings account, accruing only a small interest.
Secure investment strategies mentioned above are perfect for someone who has got money to invest and time to wait, but is reluctant to risk. It is true that it will result in a small amount in comparison with more aggressive strategies, but profit-making is guaranteed. |
