Saving money - choosing the best investment

In the modern capitalistic world we have plenty of opportunities to save our money. Some of them can multiply your money but another can shrink them. To help for better understanding of volatility of finances I aim to compare and uncover the different types  of investments, how they work and what is the potential of their profit. I will take a two year snapshot and compare the behavior of investments from april 2010 to april 2012.

First we need to beat the inflation rate. The inflation rate from april 2010 to april 2012 in UK was approximately about 7.7% and in USA was about 4.7%.

The bank deposit.
In UK banks offer a deposit for rates about 2.5 to 3% per year, in USA deposit rates are about 1% per year. This is obviously lower than inflation rates. Thi is common picture for the majority of the countries except few ones like Australia and Russia where you can get deposits rates slightly higher than inflation.

• Benefits: The easiest investment you can do. If you have a bank account you can open saving account and transfer money online.
• Drawback: Doesn’t generate enough money to beat inflation. Also in many countries they tax “income” from deposit, even though there is no real income above inflation.

Mutual funds.
Mutual funds make profit on investing shareholders money into various types of assets and businesses  like stocks, construction, precious metals. Making an investment you buy shares in mutual fund and later you can sell your shares for new price. Shares prices usually fluctuates having volatile character, they can go down making losses rather than profit. Also mutual funds charge you for money management. Usually they get fixed percent annually  from the total amount of money you invest. This type of business is always profitable for fund because they have fixed fee, and if fund investment go down they just reduce the price of the shares. 


To be more prices I wanted to grab information about shares costs for biggest investment funds in the internet. Let’s say compare a share cost at 1 april of 2010 and 1 april of 2012, then calculate a difference and subtract their charges to see the real profit. Trivial task right. But solving it reminds me a situation about going to supermarket and buying some canned or processed food and look at the label to find what is inside. I need to know how much meat is inside, simple right. I see plenty of information about how much fat, carbohydrates, vitamins and other complicated chemical entities are inside, even the percentage of vitamin A of daily norm. But no information about how much meat inside is provided. Food producer hide this information because they put cheap fillers inside and add good looking labels, they need to sell the cheap product at decent price. This is  why I buy meat and vegetables but not a junk food, because i know this is 100% meat. 


I had an experience investing in the mutual fund in the past and I got profit. Because economy that time was booming and fund invested money mostly in oil companies. But if I buy by myself the stocks of the same companies I would get way more profit and do not pay charges to that fund. Concerning to the share prices most mutual fund have the same prices on shares as they had two years ago, they even didn’t beat bank deposits, but they charged clients for their services.

• Benefits: none.
• Drawback: No warranty investment beat an inflation. Money loss on fund charges. Buying the same assets by yourself or using personal broker will always give more profit.

Precious metals.
I like simple things. You can easily calculate profit on investing in precious metals just by calculating the prices on them now and two years ago. Here it is:

Metal	Price april 2010	Price april 2012	Profit
Gold	1150 $/ounce	1641  $/ounce	42%
Palladium	531 $/ounce	648 $/ounce	22%
Platinum	1717 $/ounce	1623 $/ounce	-5%
Silver	18 $/ounce	32 $/ounce	77%

Silver is complete winner of all precious metals. If you bought silver two years ago and sell it now you could get profit which can beat inflation 10 times. This is how rich people making their money. If you want you can dig deeper about silver investment in my previous article.

• Benefits: Good profit, very simple to invest. The lowest risk possible, ingot cannot go bankrupt.
• Drawback: Not all precious metals will have a price rise. It is needed to check supply and consumption prediction.

Stocks
Stocks gives huge opportunities. If you buy stock of small company at low price and company creates a very profitable product you can earn a fortune. Also sometimes companies pay dividends on theirs stocks as an additional surplus. Usually when a market on the rise it is safe to buy stocks of big well known companies and expect getting profit.  This is how much you can earn if bought stocks two years ago.

Company	Price april 2010	Price april 2012	Profit
Google	563$	635$	12%
Ford	12.7	12.4	-2%
Apple	240$	624$	160%
Microsoft	29$	31$	6%
Shell	57$	70$	22%
Bank of new York	31$	24$	-29%
JPMorgan Chase & Co	45$	44$	-2%

For ordinary person predict which campaign get profit is like playing in casino. The surprise is what for big players it is also playing the casino, overwise all mutual  funds and personal brokers always buy profitable companies but they don’t.

• Benefits: Potentially could bring a huge profit
• Drawback: It is lottery.

Real estate
In today's world where global currency rates are unstable, and the stock markets are constantly changing, investments in real estate is still the most stable and safest form of investment that generates income every day. Real estate has always been considered the safest way to invest and preserve capital during periods of depreciation of other monetary assets. The cost of real estate is not highly changeable, such as stock price, and revenue not only from capital gains, but also on its lease. It is not possible to calculate house prices changes during this period of time like I did for metals or stocks. But in general house prices tend to rise reflecting not only inflation rate but also a population growth and lack of living space. Net profit by renting can be calculated. Let say if you bought an average house for 150 000£ and rent it for 2 years, you receive 16800£ which is equal to 11% profit. This is net profit cause property price reflect inflation.

• Benefits: Stable, decent income
• Drawback: none.

Conclusion
Investing into stocks means investing into businesses, it is not easy to predict what type of business will expand in future. Investing into precious metals or real estate means investing into resources. You can predict resource consumption in the future and how much of it will be available. Oil prices will rise because more and more people especially in developing countries have cars, oil consumption is increasing, but world oil production cannot provide more oil, oil reserves in the earth are limited. The same with silver and gold, consumption grows but production cannot. Concerning real estate we see world global population growth, all people need living spaces, but land is limited. So prices for houses and land will rise.
Investing into limited resource like silver or land or houses will always bring profit higher than inflation rate until global trend changes.