If you’ve been following the financial markets in recent times, you know that things are not right and the market is extremely volatile. Perhaps this is a pretty scary situation and many investors are apparently feeling tired when they hear the buzz word investment.
Investors in these uncertain economic times are often looking for stability and predictability and prefer investing in the right arenas to avoid conflict and to enjoy a smooth life journey. However, unless there is a risk you cannot enjoy the greater gain.
Each and every investment has a certain amount of risk associated with it. They have their own pros and cons, nevertheless, you are aware of their advantages and drawbacks, you can move your investment vehicle wisely and turn into a successful investor accruing a substantial amount of wealth.
Let us see a few investment schemes under capital investment policies and understand their pros and cons before making the investment.
Dollar Cost Averaging
If you are an economist looking for an investment scheme that cuts down on your investment risk, then you should probably consider a dollar-cost averaging strategy. Dollar-cost averaging (DCA) is not a failsafe measure. Unlike other investment strategies, they have their own pros and cons. It is a strategy that works well for long-term wealth building by means of the stock market. But what is a dollar cost averaging?
Dollar-cost averaging is the strategy of distributing out your stock or fund procurements, trading at steady interims and in approximately equal amounts. They are majorly used with the goal of reducing the impact of volatility on large purchases of financial assets such as equities.
Pros Of Dollar Cost Averaging
The strategy works based on automated and discipline investments. One of the primary advantages of investing with dollar cost averaging is, you can remove the emotional component out of the decision making. This can certainly help you avoid buying assets at determined prices irrespective of the market inflation. So you will not bail out of your investment even when the price goes down. Some of the other advantages are their affordability and convenience
Cons Of Dollar Cost Averaging
This type of strategy involves more transactions resulting in high brokerage fees. This is regarded as the passive investment approach because here in this approach, you are nowhere responding to the changing environment
Investment In Bonds
Investing in bonds can reduce your investment risk and smooth the investment process however the volatility of bonds (especially short and medium-dated bonds) is lower than that of equities so they have a varying amount of advantages and disadvantages as well. Apparently, Fixed income investments bonds compensate for a fixed interest rate over a given time period and then yield the individual’s capital. Bonds are generally rated based on their creditworthiness. Higher the credits, higher the rates and vice versa. There are several advantages of investing in bonds
Pros Of Bond investment
Bonds generally have the characteristic of providing greater returns when compared with other types of investments over the long term. Bonds have a reduced amount of risks and you can make diversifications possible only with a few thousand dollars. Some of the typical advantages of investment in bonds are
- When the bond matures, you can get a fixed amount of interest
- They are less risky and less volatile
- Since bonds are rated by Standard & Poor’s and Moody’s they can assure clearer ratings.
Cons Of Investing In Bonds
Bond funds typically have higher expense ratios than stocks or mutual funds and when there is aggressive management, bonds can take on leverage and can produce significant potential losses.
Life Settlement Investments
Life settlements are fantastic opportunities for many and you can also use the gains from a life settlement to give your investment portfolio a boost. Many hedge funds, pension funds, and major financial corporations purchase life settlement due to the several benefits it offers. Although it is not the right choice for everyone, however when you are in the position to invest, it is worth considering.
Pros Of Life Settlement Investments
People who are looking for alternatives with greater immunity to market volatility, then probably it is a wonderful option. You can pursue your lifelong goals with lapsing term insurance with life settlement investments. When your scheme is about to lapse, you can even sell your policies at a guaranteed rate and protect your family. As a matter of fact, when the investor wants to weigh the benefits of life insurance then it is a more secure choice because it comprises only liquid assets which cannot be devastated both by inflation as well as global taxes.
Cons Of Life Settlement Investments
One of the major disadvantages of this policy is, the dependents must wait until your death to receive the complete benefits.