Before anything, you must know why you wanna invest. Are you looking for some quick Franklins? Or maybe you want to secure some greens for yo' kid's college fund. In any case, it is important to know your objective before investing. The second and most important is how much money ya got. How much are ya willing to lay down for some mo' money? Are you willing to go for riskier investments with the income you have?
List of Risk
In almost any investment, there is at least some risk. In that risk, however, there is oppurtunity. Below is an ordered list from meh to riskiest (aka don't invest to invest) of different things you can invest in.
1. Government Savings Bonds - This kind of investment is back by the government and pays over time. The government will never default on you and can just print more money! It is generally accepted as the least riskiest kind of investment.
2. Treasury Bonds - These are bonds by the government whom pay back tax-exempt interest over a long period of time. You can also insure for inflation, which are called I bonds.
3. Treasury Bills - These are like Treasury bonds, but are very short term (maximum being 1 year payout). The total investment is paid back to you over the period.
4. Certificates of Deposit - This is kind of like a government bond, with the bank promising to pay you back specific amounts plus interest. These are also pretty safe because it is insured by the FDIC.
5. Municipal Bonds - This is a bond that is lent to the county, state, or nation. This is a great bond for rich people to invest in because it is usually exempt from taxes. The money from these are used to fund projects such as highways and schools.
6. Mutual Funds - These is considered a medium-level risk investment. You and others pool together money. This money is then used to buy a variety of different kinds of stocks. This is considered risky because you don't individually have a say in which stocks are bought.
7. Corporate Bonds - Like government bonds, but much riskier and has higher interest rates. These type of investments are taxable. They are more risky than government bonds because they usually have to rely on future porfits to pay you back.
8. Blue Chip Stocks - These stocks are those of companies which are usually safe to invest in. They have operated for a relatively long time, and are usually the market leader. Prices tend to be stable. Unseen variables, such as in the case of General Motors, can destory these stock and are considered risky at best.
9. 401(k) - This is a replacement to retirement plans. You save a portion of your income into investment that your companies does. This can be potentially risky depending on what your company decides to invest in.
10. High Risk Stocks - These stocks are from companies in industries that fluctuate variably. Industries include: Airplane, hotels, car manufactures. These industries are tied to the economy because the products are not a neccesity and are usually only bought if the consumer has money.
11. Junk Bonds - These are extremely high-risk. The company that you invest in have questionable credit and are on the verge of failing. If they do not fall into the abyss, you will make substantial more money.
Low Risk: These are your I just want some extra cash on the side without doing anything packages. Rather than letting your cash sit under your matress, you can earn a bit more by investing in (without little risk):
CDs, Government bonds, T-Bills.
Medium Risk: So you want a little more than letting money sit in the bank. You can earn a bit more, but a little more risky in investments such as:
Municipal Bonds, Corporate Bonds, Mutual Funds, Blue Chip Stocks
High Risk: All or nothing, I just want some fast cash, regardless of the potential for it fail. Gotta go fast!
Junk Bonds, Riskier stocks and bonds, 401(k)