A novice investor would get baffled with the research and market analysis, numbers or choosing from an array of investment options.
To begin with, it would be wise to invest in low-risk, moderate yield and short term options. The dividends earned can be re-invested in other options later. One can avoid high-risk options which can bring high yields, but crash badly if the market falls.
After making a few purchases, one will get the art of choosing a good combination from many investments. This is termed as diversification of funds. One can choose from the following:
Money market fund: safe investment with less than a year for maturity. Money from this fund is invested by the firm in low-risk options. The returns suffer only if the option fares poorly in the market. Mutual fund is used to diversify money in safe securities like Treasury bill, commercial paper, or banker’s acceptance.
Treasury bill: a security option floated by the government. It can have maturity term in days, weeks or months. The bill is purchased at a value lesser than its face value and subsequently redeemed for a higher worth at the time of its maturity.
Certificate deposits: money is deposited in banks for a fixed time period at a fixed rate of return. This is a low-risk investment with term varying from few months to 5 years during which money can not be withdrawn.
A small sized capital, patience for long term maturity and learning the tricks of good, diversified investments. These traits qualify for an investor who will reap high returns by diversifying money in different trading options.