You know what it is. That's right. It's time to talk money with your money nerd and financial coach. Now, tighten those purse strings and open those ears. It's the money talk with Tiff podcast. Hey, hey, and welcome to another episode of Tiffany's Take, where I answer your money questions right here on the podcast. So if you have a question that you want me to answer, just go to www.moneytalkwitht.com. ask Tiffany and I will be more than happy to answer.
There's also a feature on there where you can record your voice. I would love to hear some of you all's voices. That would be awesome. But if not, you can also just do it with text as well. So anyway, this question today, someone asks, what are the pros and cons of different investment options? So I made a list of a few different types of investments. Now, of course, investing is very wide. Like, you can invest
in a whole bunch of different things. So I'm going to mainly, so I'm going to talk about the main forms of investing. But of course, like I said, you can invest in businesses. You can invest like, there's so many things you can invest in. So that was a very general question, but I'll try to make it as specific as possible. So first and foremost, let's hop into it. Stocks. So stocks is when you own a piece of a company. So some of the pros for that are
potential for high returns. So, you know, if the company's doing well, they invest some of their earnings back into the business, and then the rest they give to their shareholders, which would be you. And so if the company's doing really well, then you get some of that profit and you can make money. Also, if the company's doing well, the stock price is going to go up, and so that makes more people want to buy it, therefore continuing to
drive the price. So if you look at something like Amazon or Google or any of these tech companies, for instance, if you look at what they were worth, let's say ten years ago, versus what they were worth now, you'll see that as more and more people bought the stocks, then the stock price goes up, the people that were already in make more money and so on and so forth, that's
pretty much how investing in the stock market goes. So anyway, you do have ownership in the companies, and then it's also very liquid. So it's very easy to buy and sell stocks. I just sold some the other day, and it's a very easy process. Some consort, sometimes, depending on the company, there's very high volatility and risk. It also
requires some research and some knowledge about what you're looking at. Like I can go into a whole different tangent about the different indicators and things that you can look at, you know, stuff financials and things like that to make sure that you're making a good investment. And then sometimes emotional stress due to market fluctuations. So the market is always going up and down, up and down. And that's why I don't even look at it honestly when I
invest, I invest for the long term. And so I just buy some stocks or mutual funds, which I'll talk about later, or some bonds or whatever, and I just let it sit and that's it. I don't really touch it too much. So that can kind of cut out that con. But anyway, stocks is one way that you can invest. Another way to invest is bonds. So bonds, some pros with that steady income through interest is lower risk compared to stocks. And it has
some diversification. Diversification. So usually what I tell people is you want to diversify between stocks and bonds. So depending on how close you are to retirement is how much you would want in stocks versus bonds, since stocks are more volatile. If you're young like me, then you can have more of those in your portfolio than bonds because you have way more time for the market to correct itself and to, you know, make more money on the long term.
You would want more bonds if you're like close to retirement and you don't have that time to let the market do what it's going to do. Right? So that gets me to the cons with bonds. It has lower returns than stocks. There is an interest rate risk. So interest rates fluctuate just like stocks and bonds do. And so you have to also think about that. What is the Fed doing? What's the interest rate here? What is my interest rate with this bond? Would it be better if I just put in a savings account?
You can start thinking through those things. Then. Another con is inflation can erode your returns because you're letting your money sit there with a lower return on investments than, let's say, a stock. And so if inflation is high, then that's eating up what you can make. So those are some things to keep in mind when it comes to bonds. Let's go into real estate, which is something that I want to get into more. I do have some real estate now, but I want to get
into it even more because I love it. But some pros with that, it's a tangible asset. So it's something that you can actually see, feel, touch. If you so choose, there's potential for rental income, whether you decide to do short term rentals, medium term rentals, or long term rentals. Short term rentals would be like
Airbnb, VrBo, things like that. Medium term is like, you know, if there's travel nurses or something coming into town, they might rent it for like a few months, or people that, or people that filed an insurance claim, they're waiting for their house to get repaired or whatever the case may be. Those are more the medium term. And then long term is what you're mostly familiar with, which would be just getting a
renter in there and doing a lease. So there's so many different options when it comes to owning real estate for renters income. And then also there's tax benefits with real estate. So if you're not familiar, make sure you get with a tax professional, do some research on what those tax benefits are and how you can take advantage of them. Now, some cons with real estate, it requires significant capital, whether it comes in the form of actual cash or a loan.
And it's also an illiquid asset. Even though you can sell a house or sell some land or whatever the case may be, it does take some time. So it's nothing like a stock where you can just sell it today, get your money, you good in like a few days. With a real estate, it'll take a little longer time. So that's why we consider an illiquid asset. Also, management and maintenance costs. You got to keep the property up, whether it's land or a house or a commercial building,
you still have to keep it up. So you have to pay for management, maintenance costs, all those things. So there's definitely some cons with investing in real estate, but there's also many pros as well. Mutual funds. So this is one of my favorite things to do when it comes to investing in the stock market particularly. But mutual funds offers like diversification
from the outset. So mutual funds, I like to tell people it's like a basket of stocks, and you are buying multiple companies in one swoop. So you have immediate diversification versus buying individual companies. It's also managed by professionals, people behind the scenes that are, you know, going in, changing out the companies, making sure it's making money, you know, that type of thing. And it's also accessible to small investors like ourselves.
Some cons with mutual funds, there are some management fees. You will find that as expense ratios. So when you're looking at, you know, whether you want to buy it, you'll see something called expense ratio, and it'll have a percentage, and that'll tell you how much you would have to pay. And management fees. Now, they take the management fees off the top, so it's not like they're just going to be taking money from you, like after you already see it, if that makes
sense, they already take it out. As part of owning the mutual fund, you have less control over the individual investments. Like I said, is somebody else handling that part? So that's why it's also important to do your research on who's the fund manager, what's their track record, what is their five year, ten year, what does all of that look like? Also, there's a potential for lower returns due to fees. It just depends on how
you choose. But, you know, you do have those fees kind of eating into your returns as well. Another option that's similar to a mutual fund is exchange traded funds, or ETF's. Again, pros, diversification. It's also traded like stocks, and it's generally lower fees than mutual funds. And then some cons for ETF's, some of the trading costs, market risk, and sometimes they can be complex to understand something else that's similar to ETF's. And mutual funds are index
funds, which is a good option for people, too. Index funds just follow an index, so it's not anybody really touching it too much on the back end, and so the fees are lower. So I personally love mutual funds and index funds, but as with everything, you know, make sure that you're doing your research and picking what works best for you. All right? And last but not least, just because it's a hot button and everybody wants to talk about it, but cryptocurrencies. So I personally don't
invest in cryptocurrencies, which I'll get into. Why? Why, you know, when I get to the cons. But some pros are, it's high potential returns is decentralized and global, and it's increasing in acceptance. So more and more places are starting to take cryptocurrency and things like that. Now, the cons is it's extremely volatile, very
volatile. And that's one of the reasons I don't get into it. You know, when I was in my master's program, one of my teachers who's an economist, she was like investing in currencies, and not just cryptocurrencies, but currencies in general is like picking up pennies in front of a steamroller, because you never know when it's about to go down. And the amount of money that you make, you know, on a day to day is not too much, you know what I'm saying? So
when she said that, it just stuck with me. And I don't really do cryptocurrencies like that. But anyway, also, there's regulatory uncertainty. So that's one thing that I struggle with, too. Warren Buffett was like, don't invest in anything that you don't fully understand. And I take that to heart. And I'm just like, so people can mine and just make more. And you, you know, this, that and the other. Like, there's, there's many things with cryptocurrencies that I'm just not comfortable
dealing with as an investor. And then security risks. So, of course there's security risks when it comes to cryptocurrencies. We saw what happened with the big cryptocurrency shakedown that happened not too long ago, where the bank shut down and things like that. So you just have to be careful. Now, don't get me wrong, there's plenty of people that make plenty of money in cryptocurrencies. So if you have the time, you want to do the research, you want to get into all
of that, by all means, feel free to do it. I just say do it from a place of knowledge. Do it from a place of knowing what you're getting into versus doing it so that you can follow a trend. Because usually, and I'll be honest with you, since we're on the topic of investing, usually if something is trending, it's probably at its peak or it's going to its peak. And so the people that make it in before it's
trending, those are the people that actually make money. So that's why it's important to do your research, see what's out there, and get on it early before you start seeing the crowd go. All right, well, thank you so much for listening to this episode today, and hopefully that answered your question. If you have a question that you want to ask on the podcast, just go to moneytalkwitht.com axtiffany and I'll be more
than happy to answer for you. In the meantime, in between time, please be sure to share, subscribe, all of those good things, write a review rate, and review the podcast. I would love some more ratings. Let me know what you think, and I will talk to you next week. Bye. Thank you for listening, joining and being a part of the Money Talk with TIFF podcast this week. You can check TIFf out every Thursday for a
new Money Talk podcast. But if you just can't wait until next week, you can listen to previous podcast [email protected] or follow tiff on all social media platforms at moneytalkwitht. Until next time, spend wise by spending less than you make. A word to the money wise is always sufficient.